1. Economics Lecture 2 Khasan Redjaboev kredjaboev@wiut.uz Economics for WIUT L

2. Content Costs Fixed and variable Opportunity costs Firm specific relations

3. Costs The amount of money we spend to produce a certain type or product or deliver a particular service is called costs

4. Costs To produce the optimal amount of output we should optimally use our inputs.

5. Fixed factor An input that cannot be increased in supply within a given time period

6. Short-run The period of time over which at least one factor is fixed

7. Variable factor An input that can be increased in supply within a given time period

8. Long-run The period of time long enough for all factors to be varied

9. SALES DISCOUNTS FLOWER SHOP

10. The Law of Diminishing Returns With one or more factors fixed, there will be a point at which each additional variable factor will bring less additional output. That is you get less than you spend

11. PAPER WRAP PRODUCTION

12. POWER POINT SPACE USAGE

13. Opportunity Cost Cost measured in terms of the best alternative forgone. In other words it is the opportunity lost.

14. Opportunity Cost You are offered a job. Can work in UZ BAT for 400,000 UZS per month and enroll into Manager Program ® ™ and go to Georgia and Russia in two years. Or you can work in a private firm LABEL EX and earn 800,000 UZS per month immediately.

15. Historic Costs Costs that are gone and now cannot be replaced by utilizing it in other way than specified. Also called sunk cost.

16. Fixed costs Total costs that do not vary with the amount of output produced

17. Variable Costs Total costs that vary with the amount of output produced

18. Total Costs The sum of total fixed costs and total variable costs TC = TFC + TVC

19. Average Costs Total cost per unit of production AC = TC/Q

20. References John Sloman, Essentials of Economics, 4 th edn, 2007, chapter 3, pages 82-90