1.2.3 business costs, revenues and profit Flashcards
Total revenue
Total amount of money generated from a sale
Total revenue equation
Total revenue = price x quantity
Costs
Expense paid by businesses when setting up and running a business
Total costs
Costs to a firm of producing all output over a period
Total costs equation
Total cost = total fixed costs + total variable costs
Total fixed costs
Costs that don’t vary with the level of output (rent, ads, equipment, insurance, employer wages, etc.)
Total variable costs
Costs that change depending on output of production (packaging, electricity, water, raw materials, etc.)
Average costs
The cost of producing one unit
Average costs equation
Average cost = total cost/quantity produced
Profit
Amount made gained from a sale excluding total costs
Profit equation
Profit = total revenue - total costs
