Fixed/Variable/Total Costs and the Marginal Cost of Production Defined & Explained in One Minute

You can consider fixed, variable and total costs the foundation of microeconomics because, frankly, it's hard to envision an analysis in which you don't come across these terms.

The same way, the marginal cost of production is yet another example of a term you need to understand if you're serious about economics in general and microeconomics in particular.

If you read a report in which fixed and/or variable costs are analyzed and which also refers to the marginal cost of production as well as other metrics, it might seem overwhelming at first.

However, frankly, a well-presented definition of fixed, total or variable costs can actually act as an explanation as well, that's how easy to understand these things are if you have the right "teacher" :)

The same way, wrapping your head around marginal costs of productions isn't all that difficult either and as you'll be able to find out by watching this video, the marginal cost of production is explained in a fairly accessible manner.

At the end of the day, ask yourself: can you really assess the health of a business without understanding the total costs involved? The same way, can you explain what these total costs mean without referring to fixed costs as well as variable costs? And, finally, making trajectory-altering decisions without factoring in metrics such as the marginal cost of production would be... well, let's just say sub-optimal!

[OneMinuteEconomics]

GiganticWebsites.com is a project through which I make it possible for people to build truly gigantic websites (thousands of articles each!) at ridiculously low prices. If you have a great domain you want to turn into an amazing website or an existing site you'd like to upgrade/scale, visit our website or check out the One Minute Economics presentation video below:


Please note that this comment is not an ad for a third-party service provider. GiganticWebsites.com is my baby 100% and I will personally be involved in each and every project so as to ensure the website turns out great :)

[shanayamthembu]

Amazing explanation thank you ❤️❤️❤️❤️

[gryasserswee]

nice work man, no bos bos konushuma .

[trishadimapilis]

learned a lot!! thank u for this :)) what a life saver haha

[Raikou_Zenith]

fixed costs be like:
hey i can slack around in my boss's office building and still get paid for it let's GOOO!!!

[joelyaw]

Scenario
You are working as a graduate within the engineering department of a manufacturing and
consulting focused public listed company. You and your team are working on the post-COVID
recovery and how best to allocate capital. Your team has $1, 000, 000 in capital at their disposal.
The entire department is going to have a conference call next week and you have been asked
to prepare a memo for the team regarding the financial options being considered. As the
accounting department will be joining your memo is to prepare the staff for the call.
The accountants are expected to use terms which may not be fully understood by the greater
department. So your memo will be distributed before the call or you may be asked to speak on
the call to assist everyone's understanding. The memo should discuss each of the following:

4. A new product line is also being proposed and it is expected that the accountants
will discuss this option. Explain the difference between fixed and variable costs
and state at least three examples of each that the company may incur.