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Economics
13 Dec 2025
59
2 pages
Sana @sana_ilzu
Understanding business costs is crucial for analysing how companies make decisions about production and pricing. We'll explore the... Show more
The short run is when at least one factor of production (like machinery or factory space) is fixed and can't be changed. In contrast, the long run allows businesses to adjust all their factors of production - they can buy new equipment, hire more staff, or move to bigger premises.
Variable costs change directly with how much you produce. Think of The Guardian newspaper - if they print more copies, they'll need more ink, paper, and possibly overtime wages. These costs go up and down with output levels.
Fixed costs stay the same regardless of production levels. The Guardian still pays the same rent for their offices and the same salaries to permanent staff whether they print 10,000 or 100,000 newspapers. Equipment costs, rent, and regular salaries are typical fixed costs.
The total cost formula is straightforward Total Cost = Total Variable Cost + Total Fixed Cost. This helps businesses understand their complete cost structure.
Quick Tip Remember that fixed costs are only "fixed" in the short run - eventually, even rent and equipment can be changed!
Total Fixed Costs (TFC) appear as a horizontal line on a graph because they don't change with quantity produced. Whether a company makes 1 unit or 1,000 units, total fixed costs remain constant.
Average Fixed Costs (AFC) tell a different story entirely. The formula is AFC = Total Fixed Costs ÷ Quantity. As production increases, you're spreading the same fixed costs across more units, making each unit cheaper to produce.
This creates the famous "Always Falling AFC curve" - a downward sloping curve that never quite reaches zero. The more you produce, the smaller your average fixed cost per unit becomes, which is why mass production can be so profitable.
Remember, both TFC and AFC only exist in the short run since that's when factors are fixed. In the long run, businesses can adjust everything, so these concepts become less relevant for long-term planning.
Memory Hook AFC = "Always Falling Curve" - this nickname will help you remember its shape in exams!
Our AI Companion is a student-focused AI tool that offers more than just answers. Built on millions of Knowunity resources, it provides relevant information, personalised study plans, quizzes, and content directly in the chat, adapting to your individual learning journey.
You can download the app from Google Play Store and Apple App Store.
That's right! Enjoy free access to study content, connect with fellow students, and get instant help – all at your fingertips.
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Transform this note into: ✓ 50+ Practice Questions ✓ Interactive Flashcards ✓ Full Mock Exam ✓ Essay Outlines
Explore key concepts of firm profits in economics, including normal profit, supernormal profit, and the shut-down rule. This summary covers short-run and long-run equilibrium, profit maximization, and the implications of total revenue versus total costs. Ideal for A-level Economics students seeking to grasp essential profit theories.
EconomicsExplore key concepts from the Edexcel Level 3 GCE Economics A Paper 1, focusing on market behavior, equilibrium price, price elasticity of demand, and competition. This comprehensive summary covers essential topics such as supply and demand dynamics, market structures, and government intervention, providing valuable insights for exam preparation.
EconomicsExplore the concepts of economies and diseconomies of scale in this detailed summary for CCEA A2 Business Studies. Understand how production scale affects costs, the benefits of growth, and the challenges faced by large firms. Key topics include internal and external economies of scale, managerial complexities, and the impact on communication and motivation. Ideal for exam preparation and enhancing your understanding of business growth dynamics.
EconomicsExplore key concepts of production and productivity in microeconomics, including factors of production, productive efficiency, and the impact of labor productivity on economic growth. This summary provides a comprehensive overview for AQA AS Level students, highlighting essential definitions and relationships between output and efficiency.
EconomicsExplore the key concepts of economic systems, including mixed, command, and market economies. This summary covers the roles of government intervention, supply and demand, and the importance of specialization and trade. Ideal for students preparing for exams or seeking to deepen their understanding of economics. Type: Summary.
EconomicsExplore key concepts in microeconomics, including scarcity, opportunity cost, and the Production Possibilities Frontier (PPF). This summary covers economic specialization, market economies, and the efficiency of resource allocation, providing a comprehensive overview for students. Ideal for exam preparation or quick revision.
EconomicsApp Store
Google Play
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
Sana
@sana_ilzu
Understanding business costs is crucial for analysing how companies make decisions about production and pricing. We'll explore the difference between short-run and long-run costs, and how fixed and variable costs behave as output changes.
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Join milions of students
By signing up you accept Terms of Service and Privacy Policy
The short run is when at least one factor of production (like machinery or factory space) is fixed and can't be changed. In contrast, the long run allows businesses to adjust all their factors of production - they can buy new equipment, hire more staff, or move to bigger premises.
Variable costs change directly with how much you produce. Think of The Guardian newspaper - if they print more copies, they'll need more ink, paper, and possibly overtime wages. These costs go up and down with output levels.
Fixed costs stay the same regardless of production levels. The Guardian still pays the same rent for their offices and the same salaries to permanent staff whether they print 10,000 or 100,000 newspapers. Equipment costs, rent, and regular salaries are typical fixed costs.
The total cost formula is straightforward: Total Cost = Total Variable Cost + Total Fixed Cost. This helps businesses understand their complete cost structure.
Quick Tip: Remember that fixed costs are only "fixed" in the short run - eventually, even rent and equipment can be changed!
Access to all documents
Improve your grades
Join milions of students
By signing up you accept Terms of Service and Privacy Policy
Total Fixed Costs (TFC) appear as a horizontal line on a graph because they don't change with quantity produced. Whether a company makes 1 unit or 1,000 units, total fixed costs remain constant.
Average Fixed Costs (AFC) tell a different story entirely. The formula is: AFC = Total Fixed Costs ÷ Quantity. As production increases, you're spreading the same fixed costs across more units, making each unit cheaper to produce.
This creates the famous "Always Falling AFC curve" - a downward sloping curve that never quite reaches zero. The more you produce, the smaller your average fixed cost per unit becomes, which is why mass production can be so profitable.
Remember, both TFC and AFC only exist in the short run since that's when factors are fixed. In the long run, businesses can adjust everything, so these concepts become less relevant for long-term planning.
Memory Hook: AFC = "Always Falling Curve" - this nickname will help you remember its shape in exams!
Our AI Companion is a student-focused AI tool that offers more than just answers. Built on millions of Knowunity resources, it provides relevant information, personalised study plans, quizzes, and content directly in the chat, adapting to your individual learning journey.
You can download the app from Google Play Store and Apple App Store.
That's right! Enjoy free access to study content, connect with fellow students, and get instant help – all at your fingertips.
5
Smart Tools NEW
Transform this note into: ✓ 50+ Practice Questions ✓ Interactive Flashcards ✓ Full Mock Exam ✓ Essay Outlines
Explore key concepts of firm profits in economics, including normal profit, supernormal profit, and the shut-down rule. This summary covers short-run and long-run equilibrium, profit maximization, and the implications of total revenue versus total costs. Ideal for A-level Economics students seeking to grasp essential profit theories.
EconomicsExplore key concepts from the Edexcel Level 3 GCE Economics A Paper 1, focusing on market behavior, equilibrium price, price elasticity of demand, and competition. This comprehensive summary covers essential topics such as supply and demand dynamics, market structures, and government intervention, providing valuable insights for exam preparation.
EconomicsExplore the concepts of economies and diseconomies of scale in this detailed summary for CCEA A2 Business Studies. Understand how production scale affects costs, the benefits of growth, and the challenges faced by large firms. Key topics include internal and external economies of scale, managerial complexities, and the impact on communication and motivation. Ideal for exam preparation and enhancing your understanding of business growth dynamics.
EconomicsExplore key concepts of production and productivity in microeconomics, including factors of production, productive efficiency, and the impact of labor productivity on economic growth. This summary provides a comprehensive overview for AQA AS Level students, highlighting essential definitions and relationships between output and efficiency.
EconomicsExplore the key concepts of economic systems, including mixed, command, and market economies. This summary covers the roles of government intervention, supply and demand, and the importance of specialization and trade. Ideal for students preparing for exams or seeking to deepen their understanding of economics. Type: Summary.
EconomicsExplore key concepts in microeconomics, including scarcity, opportunity cost, and the Production Possibilities Frontier (PPF). This summary covers economic specialization, market economies, and the efficiency of resource allocation, providing a comprehensive overview for students. Ideal for exam preparation or quick revision.
EconomicsApp Store
Google Play
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
The app is very easy to use and well designed. I have found everything I was looking for so far and have been able to learn a lot from the presentations! I will definitely use the app for a class assignment! And of course it also helps a lot as an inspiration.
Stefan S
iOS user
This app is really great. There are so many study notes and help [...]. My problem subject is French, for example, and the app has so many options for help. Thanks to this app, I have improved my French. I would recommend it to anyone.
Samantha Klich
Android user
Wow, I am really amazed. I just tried the app because I've seen it advertised many times and was absolutely stunned. This app is THE HELP you want for school and above all, it offers so many things, such as workouts and fact sheets, which have been VERY helpful to me personally.
Anna
iOS user
Best app on earth! no words because it’s too good
Thomas R
iOS user
Just amazing. Let's me revise 10x better, this app is a quick 10/10. I highly recommend it to anyone. I can watch and search for notes. I can save them in the subject folder. I can revise it any time when I come back. If you haven't tried this app, you're really missing out.
Basil
Android user
This app has made me feel so much more confident in my exam prep, not only through boosting my own self confidence through the features that allow you to connect with others and feel less alone, but also through the way the app itself is centred around making you feel better. It is easy to navigate, fun to use, and helpful to anyone struggling in absolutely any way.
David K
iOS user
The app's just great! All I have to do is enter the topic in the search bar and I get the response real fast. I don't have to watch 10 YouTube videos to understand something, so I'm saving my time. Highly recommended!
Sudenaz Ocak
Android user
In school I was really bad at maths but thanks to the app, I am doing better now. I am so grateful that you made the app.
Greenlight Bonnie
Android user
very reliable app to help and grow your ideas of Maths, English and other related topics in your works. please use this app if your struggling in areas, this app is key for that. wish I'd of done a review before. and it's also free so don't worry about that.
Rohan U
Android user
I know a lot of apps use fake accounts to boost their reviews but this app deserves it all. Originally I was getting 4 in my English exams and this time I got a grade 7. I didn’t even know about this app three days until the exam and it has helped A LOT. Please actually trust me and use it as I’m sure you too will see developments.
Xander S
iOS user
THE QUIZES AND FLASHCARDS ARE SO USEFUL AND I LOVE THE SCHOOLGPT. IT ALSO IS LITREALLY LIKE CHATGPT BUT SMARTER!! HELPED ME WITH MY MASCARA PROBLEMS TOO!! AS WELL AS MY REAL SUBJECTS ! DUHHH 😍😁😲🤑💗✨🎀😮
Elisha
iOS user
This apps acc the goat. I find revision so boring but this app makes it so easy to organize it all and then you can ask the freeeee ai to test yourself so good and you can easily upload your own stuff. highly recommend as someone taking mocks now
Paul T
iOS user
Sociology