Fixed/Variable/Total Costs and the Marginal Cost of Production Defined & Explained in One Minute
One Minute Economics
Published at : 08 Dec 2020
You can consider fixed, variable and total costs the foundation of microeconomics because, frankly, it's hard to envision an analysis in which you don't come across these terms.
The same way, the marginal cost of production is yet another example of a term you need to understand if you're serious about economics in general and microeconomics in particular.
If you read a report in which fixed and/or variable costs are analyzed and which also refers to the marginal cost of production as well as other metrics, it might seem overwhelming at first.
However, frankly, a well-presented definition of fixed, total or variable costs can actually act as an explanation as well, that's how easy to understand these things are if you have the right "teacher" :)
The same way, wrapping your head around marginal costs of productions isn't all that difficult either and as you'll be able to find out by watching this video, the marginal cost of production is explained in a fairly accessible manner.
At the end of the day, ask yourself: can you really assess the health of a business without understanding the total costs involved? The same way, can you explain what these total costs mean without referring to fixed costs as well as variable costs? And, finally, making trajectory-altering decisions without factoring in metrics such as the marginal cost of production would be... well, let's just say sub-optimal!
fixed costfixed costsvariable cost