Livestock Economics, Marketing and Business Management

FIXED COST, VARIABLE COST AND TOTAL COST

• A resource or input is called a fixed resource if its quantity does not vary during the production period.
• An input is a variable input if its quantity varies during the production period.
• In general, costs associated with the fixed inputs are called fixed costs and the costs associated with variable inputs arte called variable costs.
• Fixed costs have to be incurred even when the production is not undertaken. It  does not vary with level of output.
• Variable costs vary with the level of production.
• Total costs of production will include both fixed and variable costs.
• Fixed cost is also called as sunk cost or overhead charges.