Summary of Day 6 | Micro economics | Cost | Chapter 6 | One Shot
The video provides an in-depth look at microeconomics, specifically focusing on the concept of cost in Chapter 6. Understanding the relationship between production, cost, and revenue is crucial in this context. The chapter delves into various types of costs, including explicit and implicit costs, fixed and variable costs, and opportunity costs. Concepts such as cost function, opportunity cost, short run and long run costs, and the differences between explicit and implicit costs are explained.
- Calculating average fixed cost, average variable cost, and average total cost is a key methodology discussed in the video.
- The curves for these costs are plotted, with explanations on their shapes and underlying reasons.
- The law of variable proportion and the behavior of these curves are highlighted, along with the significance of intersection points and minimum points on the curves to understand the cost relationships.
Moving on, the video explains the intricacies of average cost (AC) and average variable cost (A), emphasizing that the minimum point of AC occurs before it stops falling due to its dependence on A. marginal cost (MC) is defined as the additional cost of producing one more unit of output, calculated by dividing the change in total cost by the change in output. The relationship between average cost and marginal cost is explored, with the understanding that when MC falls, AC will also decrease.
- The curve of marginal cost is described as resembling a tick, initially falling, reaching a minimum, and then increasing.
- It follows the curve it cuts and is at its minimum when intersecting.
- The video also touches on the relationship between total cost, total variable cost, and marginal cost, illustrating how they are interconnected.
Overall, the video provides a comprehensive overview of cost analysis in microeconomics, shedding light on essential concepts and their practical applications.
Notable Quotes
— 53:09 — « What is the formula? Change in total quantity. Divide by change in output. »
— 54:30 — « Curve of marginal cost that will be formed will be something like a tick. »
— 57:26 — « Second thing is that the marginal cost follows the curve. »
— 59:30 — « What will you take? Will cut. When the marginal was falling, these were also falling. »
— 62:54 — « What is the relationship between Total Variable Cost and Marginal Cost which is equal to Marginal Cost if you keep adding area under the curve. »
Category
Educational