Relationship Between Total Cost, Output, And The Price Of Labor And Capital

815 WordsMay 20, 20164 Pages
Purpose: Introduction The purpose of this report is to discuss relationships between total cost, output, and the price of labor and capital. In economics total cost refers to all the cost associated with producing and selling a particular item. This cost can change as prices to produce a product fluctuate due to changes in the market. In every business practice a determination of total cost must be determine to understand if a business is profitable. There are multiple contributing factors that affect the total cost of conducting any business. Output refers to the amount of goods and services that are able to be produced in a given period of time. Labor costs are the total amount of money paid to employees for a period, such as a week or a month. In manufacturing business, often management will break down labor costs into direct costs and indirect costs (McBride, 2016). The term capital can have a number of meaning, but in business capital refers to the amount of funds needed to start and maintain business operations. Understanding the relationships between total cost, output, and the price of labor and capital is crucial to the success of business practices. How the prices of inputs affect managerial decisions? In order to understand how the prices of inputs affect managerial decision we must first understand managerial decisions. In today’s economy managers are expected to have a wide of knowledge and skills needed to maneuver the complex world of
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