Variable cost - Revision history

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	[[File:Fixed_Total_Variable_cost.png\|thumb\|400px\|right\| Figure 1. A graph showing how the fixed costs stay constant, the variable costs change and the total cost is the sum of the two.<ref name = graph>Graph made by a member of the energy education team.</ref>]]		[[File:Fixed_Total_Variable_cost.png\|thumb\|400px\|right\| Figure 1. A graph showing how the fixed costs stay constant, the variable costs change and the total cost is the sum of the two.<ref name = graph>Graph made by a member of the energy education team.</ref>]]
	[[File:Average_Fixed_Total_Variable_cost.png\|thumb\|400px\|right\| Figure 2. A graph showing how the average fixed cost, the average variable cost change with units produced. Note how the variable cost decreases up to a point, but with more units produced, the average variable cost starts to increase again.<ref name = graph/>]]		[[File:Average_Fixed_Total_Variable_cost.png\|thumb\|400px\|right\| Figure 2. A graph showing how the average fixed cost, the average variable cost change with units produced. Note how the variable cost decreases up to a point, but with more units produced, the average variable cost starts to increase again.<ref name = graph/>]]
	A '''cost''' is what a firm, an individual or society pays to produce or consume [[goods and services]]. It is the consumption of resources such as labour time, capital, materials, fuels, etc. In economics, all resources are valued at their [[opportunity cost]], which is the value of the alternative use of the resources. Costs are defined in a variety of ways and under a variety of assumptions that affect their value. The opposite of a cost is a benefit and often both are considered together. For example, net cost is the difference between gross costs and benefits.<ref>A. Verbruggen, W. Moomaw and J. Nyboer. ''Glossary of terms used in the: Special Report on Renewable Energy Sources and Climate Change Mitigation (SRREN).'' [Onlince], Available: http://www.ipcc.ch/publications_and_data/publications_and_data_glossary.shtml [May.29, 2016]</ref>		A '''cost''' is what a firm, an individual or society pays to produce or consume [[goods and services]]. It is the consumption of resources such as labour time, capital, materials, fuels, etc. In economics, all resources are valued at their [[opportunity cost]], which is the value of the alternative use of the resources. Costs are defined in a variety of ways and under a variety of assumptions that affect their value. The opposite of a cost is a benefit and often both are considered together. For example, [[net cost]] is the difference between gross costs and benefits.<ref>A. Verbruggen, W. Moomaw and J. Nyboer. ''Glossary of terms used in the: Special Report on Renewable Energy Sources and Climate Change Mitigation (SRREN).'' [Onlince], Available: http://www.ipcc.ch/publications_and_data/publications_and_data_glossary.shtml [May.29, 2016]</ref>

	==Variable Cost==		==Variable Cost==

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	==References==		==References==
	{{reflist}}		{{reflist}}
			[[Category: Uploaded]]

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Jmdonev at 20:49, 18 May 2018

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	[[Category:Done ~~2016~~-04-30]]		[[Category:Done 2018-05-18]]
	[[File:Fixed_Total_Variable_cost.png\|thumb\|400px\|right\| Figure 1. A graph showing how the fixed costs stay constant, the variable costs change and the total cost is the sum of the two.<ref name = graph>Graph made by a member of the energy education team.</ref>]]		[[File:Fixed_Total_Variable_cost.png\|thumb\|400px\|right\| Figure 1. A graph showing how the fixed costs stay constant, the variable costs change and the total cost is the sum of the two.<ref name = graph>Graph made by a member of the energy education team.</ref>]]
	[[File:Average_Fixed_Total_Variable_cost.png\|thumb\|400px\|right\| Figure 2. A graph showing how the average fixed cost, the average variable cost change with units produced. Note how the variable cost decreases up to a point, but with more units produced, the average variable cost starts to increase again.<ref name = graph/>]]		[[File:Average_Fixed_Total_Variable_cost.png\|thumb\|400px\|right\| Figure 2. A graph showing how the average fixed cost, the average variable cost change with units produced. Note how the variable cost decreases up to a point, but with more units produced, the average variable cost starts to increase again.<ref name = graph/>]]
	A '''cost''' is what a firm, an individual or society pays to produce or consume [[goods and services]]~~, it~~ is the consumption of resources such as labour time, capital, materials, fuels, etc.~~<onlyinclude>~~ In economics, all resources are valued at their [[opportunity cost]], which is the value of the alternative use of the resources. Costs are defined in a variety of ways and under a variety of assumptions that affect their value. The opposite of a cost is a benefit and often both are considered together~~, for~~ example, net cost is the difference between gross costs and benefits.<ref>A. Verbruggen, W. Moomaw and J. Nyboer. ''Glossary of terms used in the: Special Report on Renewable Energy Sources and Climate Change Mitigation (SRREN).'' [Onlince], Available: http://www.ipcc.ch/publications_and_data/publications_and_data_glossary.shtml [May.29, 2016]</ref>		A '''cost''' is what a firm, an individual or society pays to produce or consume [[goods and services]]. It is the consumption of resources such as labour time, capital, materials, fuels, etc. In economics, all resources are valued at their [[opportunity cost]], which is the value of the alternative use of the resources. Costs are defined in a variety of ways and under a variety of assumptions that affect their value. The opposite of a cost is a benefit and often both are considered together. For example, net cost is the difference between gross costs and benefits.<ref>A. Verbruggen, W. Moomaw and J. Nyboer. ''Glossary of terms used in the: Special Report on Renewable Energy Sources and Climate Change Mitigation (SRREN).'' [Onlince], Available: http://www.ipcc.ch/publications_and_data/publications_and_data_glossary.shtml [May.29, 2016]</ref>

	==Variable Cost==		==Variable Cost==
	<onlyinclude>A '''variable cost''' is incurred by a firm as it changes its level of output~~, in short~~, a firm pays more to produce more. Variable costs are inputs that can be easily adjusted such as the purchase of raw materials for manufacture.</onlyinclude><ref>The Economist. “Economies of Scale.” [Online], Available: http://www.economist.com/economics-a-to-z/v#node-21529396[May. 29, 2016].</ref>		<onlyinclude>A '''variable cost''' is incurred by a firm as it changes its level of output. Essentially, a firm pays more to produce more. Variable costs are inputs that can be easily adjusted such as the purchase of raw materials for manufacture.</onlyinclude><ref>The Economist. “Economies of Scale.” [Online], Available: http://www.economist.com/economics-a-to-z/v#node-21529396[May. 29, 2016].</ref>

	If a firm running a [[natural gas power plant]] to [[generate electricity]] responds to greater [[demand]] in the [[market]] it will need to increase its output. The firm would then have to buy more [[natural gas]] to [[combustion\|burn]] and hire more labour to operate the plant. All of these additional expenses can change with demand, which is why this is the variable cost.		If a firm running a [[natural gas power plant]] to [[generate electricity]] responds to greater [[demand]] in the [[market]] it will need to increase its output. The firm would then have to buy more [[natural gas]] to [[combustion\|burn]] and hire more labour to operate the plant. All of these additional expenses can change with demand, which is why this is the variable cost.

	To avoid excess [[fixed cost]]s, the firm may have additional workers on a standby contract and can respond to high periods of demand. Because these workers are only paid when they work and they only work when output is higher the cost is variable rather than fixed ~~whereby~~ the employees would be on salary but may not work all the time.		To avoid excess [[fixed cost]]s, the firm may have additional workers on a standby contract and can respond to high periods of demand. Because these workers are only paid when they work and they only work when output is higher, the cost is variable rather than fixed. In contrast, the employees would be on salary but may not work all the time.

	As seen in figure 1, variable costs do go up as more units are produced.		As seen in figure 1, variable costs do go up as more units are produced.

	===Defining "Variable"===		===Defining "Variable"===
	The '''time horizon''', determines what category a cost falls into, ~~for example~~ a new lease contract with a higher rate would be a higher fixed cost because it does not change often. The price of a commodity such as natural gas or oil is variable because it changes almost daily. The longer the time horizon, the more time a firm has to adjust and the more costs will be fixed as opposed to variable.<ref>A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’’. New York: Worth Publishers, 2013, pp. 271.</ref>		The '''time horizon''', determines what category a cost falls into. For example, a new lease contract with a higher rate would be a higher fixed cost because it does not change often. The price of a commodity such as natural gas or oil is variable because it changes almost daily. The longer the time horizon, the more time a firm has to adjust and the more costs will be fixed as opposed to variable.<ref>A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’’. New York: Worth Publishers, 2013, pp. 271.</ref>

	===Average Variable Cost===		===Average Variable Cost===
	The '''average variable cost (AVC)''' is simply the variable cost divided by the quantity produced showing the variable cost per-unit. As seen in figure 2, this cost often decreases for some number of units made, but then increases as more and more units are made.<br />		The '''average variable cost (AVC)''' is simply the variable cost divided by the quantity produced showing the variable cost per-unit. As seen in figure 2, this cost often decreases for some number of units made, but then increases as more and more units are made.<br />

	::::::::::::'''AVC'''= <m>\frac{VC}{Q}</m><br />		::::::::::::'''AVC'''= <math>\frac{VC}{Q}</math><br />

	==~~See Also~~==		== For Further Reading ==
			For further information please see the related pages below:
	*[[Total cost]]		*[[Total cost]]
	*[[Fixed cost]]		*[[Fixed cost]]
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	*[[Economies of scale]]		*[[Economies of scale]]
	*[[Costs for a firm]]		*[[Costs for a firm]]
			*Or explore a [[Special:Random\|random page]]

	==References==		==References==
	{{reflist}}		{{reflist}}

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Jmdonev at 04:32, 4 September 2016

2016-09-04T04:32:50Z

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[[Category:Done 2016-04-30]]
[[File:Fixed_Total_Variable_cost.png|thumb|400px|right| Figure 1. A graph showing how the fixed costs stay constant, the variable costs change and the total cost is the sum of the two.<ref name = graph>Graph made by a member of the energy education team.</ref>]]
[[File:Average_Fixed_Total_Variable_cost.png|thumb|400px|right| Figure 2. A graph showing how the average fixed cost, the average variable cost change with units produced. Note how the variable cost decreases up to a point, but with more units produced, the average variable cost starts to increase again.<ref name = graph/>]]
A '''cost''' is what a firm, an individual or society pays to produce or consume [[goods and services]], it is the consumption of resources such as labour time, capital, materials, fuels, etc.<onlyinclude> In economics, all resources are valued at their [[opportunity cost]], which is the value of the alternative use of the resources. Costs are defined in a variety of ways and under a variety of assumptions that affect their value. The opposite of a cost is a benefit and often both are considered together, for example, net cost is the difference between gross costs and benefits.<ref>A. Verbruggen, W. Moomaw and J. Nyboer. ''Glossary of terms used in the: Special Report on Renewable Energy Sources and Climate Change Mitigation (SRREN).'' [Onlince], Available: http://www.ipcc.ch/publications_and_data/publications_and_data_glossary.shtml [May.29, 2016]</ref>

==Variable Cost==
<onlyinclude>A '''variable cost''' is incurred by a firm as it changes its level of output, in short, a firm pays more to produce more. Variable costs are inputs that can be easily adjusted such as the purchase of raw materials for manufacture.</onlyinclude><ref>The Economist. “Economies of Scale.” [Online], Available: http://www.economist.com/economics-a-to-z/v#node-21529396[May. 29, 2016].</ref>

If a firm running a [[natural gas power plant]] to [[generate electricity]] responds to greater [[demand]] in the [[market]] it will need to increase its output. The firm would then have to buy more [[natural gas]] to [[combustion|burn]] and hire more labour to operate the plant. All of these additional expenses can change with demand, which is why this is the variable cost.

To avoid excess [[fixed cost]]s, the firm may have additional workers on a standby contract and can respond to high periods of demand. Because these workers are only paid when they work and they only work when output is higher the cost is variable rather than fixed whereby the employees would be on salary but may not work all the time.

As seen in figure 1, variable costs do go up as more units are produced.

===Defining "Variable"===
The '''time horizon''', determines what category a cost falls into, for example a new lease contract with a higher rate would be a higher fixed cost because it does not change often. The price of a commodity such as natural gas or oil is variable because it changes almost daily. The longer the time horizon, the more time a firm has to adjust and the more costs will be fixed as opposed to variable.<ref>A. Goolsbee, S. Levitt and C. Syverson. ‘’Microeconomics’’. New York: Worth Publishers, 2013, pp. 271.</ref>

===Average Variable Cost===
The '''average variable cost (AVC)''' is simply the variable cost divided by the quantity produced showing the variable cost per-unit. As seen in figure 2, this cost often decreases for some number of units made, but then increases as more and more units are made.<br />

::::::::::::'''AVC'''= <m>\frac{VC}{Q}</m><br />

==See Also==
*[[Total cost]]
*[[Fixed cost]]
*[[Marginal cost]]
*[[Economies of scale]]
*[[Costs for a firm]]

==References==
{{reflist}}