Business Flashcards
(15 cards)
Need
A good or service essential for living
Want
Good or service which people would like to have, but which is not essential for living. Peoples wants are unlimited
Economic Problem
There exist unlimited wants but limited resources to produce the goods and services to satisfy those wants this creates scarcity
Fixed costs
Cost which do not vary in the short run with the number of items sold or produced. They have to be paid wheter the business is paying any sales or not. They are also known as overhead costs.
Variable costs
They are costs which vary directly with the number of items sold or produced
Total costs
They are fixed and variable costs combined
Average cost per unit
It is the total cost of production divided by total output (sometimes known as unit cost)
Economies of scale
They are the factors that lead to a reduction in average costs as a business increases in size
Diseconomies of scale
They are the factors that lead to an increase in average costs as a business grows beyond a certain size
Break-even level of output
It is the quantity that must be produced/sold for total revenue to equal total costs
Break even charts
They are graphs which show how costs and revenue of a business change with sales. they show the level of sales the business must make in order to make even.
Revenue
It is the income during period of time from sale of goods or services. Total revenue= quantity sold x price
Break even point
It is the level of sales at which total costs= total revenue
Margin of safety
It is the amount by which sales exceed the break even point
Contribution
the contribution of a product is its selling price less its variable cost
