1. 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
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2. 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

3. 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

4. Task
Show your understanding pg 100

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Capital equipment will gradually become less valuable over time, machines for example become out of date, they depreciate.

6. 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?

7. 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

8. 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

9. Task
Exam style question Q3 pg 103