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Distinguish Between Fixed and Variable Costs. Give One Example of Each. - CBSE (Arts) Class 12 - Economics

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Question

Distinguish between fixed and variable costs. Give one example of each.

Solution

 

Basis Fixed Costs Variable Costs
Definition Total of expenditure
incurred by the producer on
the purchase or hiring of fixed factors of production.
Expenditure incurred by the producer on the use of variable factors of production.
Variability Does not change with
change in quantity of output. Remains the same whether the output is zero or
maximum.
Changes with change in quantity of output.
Cost is zero when the output is zero.
Examples Cost of plant and machinery, Wages of permanent staff Cost of raw materials,
Wages of casual labours
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Solution Distinguish Between Fixed and Variable Costs. Give One Example of Each. Concept: Basic Concepts of Cost.
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