Lesson Objectives All students will understand Most students will How to calculate revenue and cost Most students will Apply these calculations to a context Some students will Understand the complexities of increasing revenue and reducing costs Progress Arrow

Sales Volume The total physical quantity of products sold is the sales volume. The total incoming of payments for the products sold is the sales revenue Calculated by quantity sold x Price

Classifying Costs Start up Costs – incurred when setting up a business Market research, fixtures and fittings, tools etc Capital Spending Premises or something of long term benefit Fixed Costs – do not change when output increases or decreases, e.g. bank loan repayment Variable Costs – vary directly with output, e.g. raw materials, packaging Total Costs – the sum of Fixed and Variable Costs so TC=FC+VC

Task Show your understanding pg 100

Depreciation Capital equipment will gradually become less valuable over time, machines for example become out of date, they depreciate.

Diminishing returns If one or more factors of production is fixed, adding more and more of a variable factor will eventually add less to output. This is the law of diminishing returns. For example, Look at figure 19.1 and the explanation – can you summarise this?

Average and Total Costs Average Total Cost tends to fall as output increases as the business is making better use of its factors of production and is benefiting economies of scale (the benefits of growing in size) At a point average total cost may start to rise as the benefits of growing are no longer apparent Consider figure 19.3 pg 102

Percentage change Percentages and percentage change are useful in economics to study the performance of any business. “Try this” pg 103 – on Then explain your worked example in your notes for revision

Task Exam style question Q3 pg 103