How Fuel Costs Affect The Economy

811 Words Dec 1st, 2016 4 Pages
Richard Santos
BUS 530 Managerial Economics
OCT 2016 FT
Dr. John Gaze
SLP 2

How Fuel Costs Affect the Economy

Managerial economics is about theory meeting practice in the real world. There are many factors to consider when making managerial decisions. Some of those variables include the relationships between total cost, total output, and the price of labor and capital. Investor Words (2016) defines total cost as “the sum of fixed costs, variable costs, and semi-variable costs.” In this paper I will explain how total cost, total output, and the price of labor and capital affect the airline industry.
Total cost is not something limited to business, however. There are many times when the consumer must should consider total cost when making purchasing decisions. For example, when purchasing an automobile, there are many numerous costs associated with owning that vehicle. In addition to the sticker price, owners need to consider the cost of registering, insuring, and maintenance on the vehicle. Those costs, which factor in the price of the automobile (fixed cost), insurance (fixed costs) and maintenance (semi-variable) are the total cost of ownership.
Total output, which is also known as aggregate supply, according to Business Dictionary (2016) total output is the total supply of goods and services produced within an economy at a given overall price level in a given time period.” When demand increases and supply stays constant, buyers compete and pay…
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