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What are Variable Costs in Economics?

Here we understand the Concept of Variable Costs in Economics in detailed.

What are Variable Costs in Economics?
Variable Costs:
Variable costs are those expenses of production which vary or change directly with the level of output. If out is expanded they increase and decrease when the output is reduced. At zero production there are no variable costs. Expenses on raw materials, power, casual labour etc are the examples of variable costs. They are also known as 'prime costs' as without raw - materials (variable costs) production is simply not possible here
Figure: Variable costs curve.
In Figure, here output is shown on X-axis and variable costs on Y-axis. Here, At OA output variable costs are = AB, when the output expands from OA to OC the variable costs increase from AB to CD.
Note: At zero production, there are no variable costs. The variable costs curve passes through the origin. The shape of the variable costs curves seem itself to the operation of the laws of returns. They increase initially at a diminishing rate, then for a while it at constant rate and beyond that an increasing rate.
In figure, variable cost curve is upward sloping, but at initial, upto point B, its slope decrease gradually showing the marginal productivity of variable factors is increasing. After B, the slope of variable cost curve increases gradually. It shows that now their marginal productivity is diminishing.
Here the table showing the relation between total output and total variable costs is illustrated in the following manner.
Total Output (units)Total Variable Costs (Rs.)
0
100
200
300
400
500
600
0
900
1700
2400
3000
3700
4500
What are Variable Costs
Prime Costs
Total Output
Total Variable Costs
Variable Costs.
Kinnari
Tech writer at NewsandStory
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