Explain the difference between fixed and variable costs?

In economics, variable cost and fixed cost are the two main costs a company has when producing goods and services. A company's total cost is composed of its total fixed costs and its total variable costs. Variable costs vary with the amount produced. Fixed costs remain the same, no matter how much output a company produces.

A variable cost is a company's cost that is associated with the amount of goods or services it produces. A company's variable cost increases and decreases with the production volume. For example, suppose company ABC produces ceramic mugs for a cost of $2 a mug. If the company produces 500 units, its variable cost will be $1,000. However, if the company does not produce any units, it will not have any variable cost for producing the mugs.

On the other hand, a fixed cost does not vary with the volume of production. A fixed cost does not change with the amount of goods or services a company produces. It remains the same even if no goods or services are produced. Using the same example above, suppose company ABC has a fixed cost of $10,000 per month for the machine it uses to produce mugs. If the company does not produce any mugs for the month, it would still have to pay $10,000 for the cost of renting the machine. On the other hand, if it produces 1 million mugs, its fixed cost remains the same. The variable costs change from zero to $2 million in this example.

 

Explain the formula of good's pricing 30.Explain the link between average cost and goods price.

TC is whole sum of money that is used in producing goods/services. Fixed costs (FC) are the costs that do not vary with output levels. Variable costs (VC) are costs that change as output changes.

TC=FC+VC

AC- is amount of money that is used in producing one unit of product

AC=TC: Q     e.g. TC=100 000 tenge, number of produced goods (Q)=5 000.

AC=100 000: 5000=20

AC is foundation of price formation

AC helps to define price of a product.

P= AC+ addition (үстеме)

P= 20 tenge+5 tenge=25 tenge

Additions are profit sources. A profit maximizing firm must produce its output at minimum cost.

 

Explain the difference between nominal and real wages.

Wage is price of labour. Labour is a special commodity.

Wage types:

nominal wage

real wage.

Nominal wage is the whole money which you get during certain period of time according to the contract or agreement.

Real wage is nominal wage after paying taxes.

Real wage=nominal wage-taxes

Changes in demand for and supply of labour

Labour hours

Trade unions activities

Inflation rate

 

Explain the difference between wage by time and wage by job.

Time Wage System:

This is the oldest method of wage payment. “Time” is made a basis for determining wages of worker. Under this system, the wages are paid according to the time spent by workers irrespective of his output of work done. The wage rates are fixed for an hour, a day, week, a month or even a year (seldom used). There are no hard and fast rules for fixing rates of wages. These may be decided according to the level of the past higher positions may be paid higher rates and vice- versa.

Advantages:

1. Simplicity:

The method of wage payments is very simple. The workers will not find any difficulty in calculating the wages. The time spent by a person multiplied by the rate will determine his wages.

2. Security:

Workers are guaranteed minimum wages for the time spent by them. There is no link between wages and output, wages are paid irrespective of output. They are not supposed to complete particular task for getting their wages. They are sure to set certain wages at the end of a specified period of time spent in working.

3. Batter Quality of Products:

When workers are assured of wages on time basis, they will improve the quality of products. If wages are related to output, then workers may think of increasing production without bothering about quality of goods.

In this method, workers will concentrate on producing better quality of goods. In certain situations, only time wage system will be suitable. If some artistic nature products are produced, then this method will be most suitable.

4. Support of Unions:

This method is acceptable to trade unions because it does not distinguish between workers on the basis of their performance. Any method which gives different wage rates or wages based on output is generally opposed by trade unions.

So as we can understand wage by job is opposite for wage by time. Basically you get your wage on pointed date. Your output mostly doesn’t depend on how long you work. It matters on which career ladder you are. The main difference is this. Also your working hour is pointed out too. It might be from 8 a.m. to 6 p.m and etc. you can be promoted and with this way you can get more output. But it takes you time. You will sign a contract that obligates you with some responsibilities. The thing is company that is providing you with job have obligations towards you too. So you have also pluses of this kind of job.