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April 25, 2018 

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SAVING FUNCTION: The positive relation between household saving and household disposable income. The saving function is commonly presented as the saving line or propensity-to-saving line. The slope of this line is the marginal propensity to save, which is the proportion of any additional income used for saving. The saving function and the marginal propensity to saving play key roles in the multiplier and accelerator concepts. Because consumption is the difference between disposable income and saving, the consumption function is a complementary relation to the saving function.

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VARIABLE COST:

In general, cost that changes with changes in the quantity of output produced. More specifically, variable cost is combined with the adjectives "total" and "average" to indicate the overall level of variable cost or the per unit variable cost. Variable cost depends on the amount produced. If there is no production, then there is no variable cost.
Variable cost is cost that depends on the quantity produced. If production is greater, then variable cost is greater. Variable cost is affected by short-run production principles, especially the law of diminishing marginal returns.

Variable Inputs

Variable cost usually includes the cost of using variable inputs, assorted resources that are variable in the short run, especially labor and material inputs. However, in practice, variable cost includes any and all cost that varies with the quantity of output.

For example, Waldo's TexMex Taco World operates in the short run with labor (the workers) as a variable input and capital (the restaurant and equipment) as a fixed input. In this case, the cost associated with labor is a prime candidate to be a variable cost. This includes hourly wage payments to the workers and any fringe benefits paid on behalf of the workers.

While labor is usually isolated as THE variable input in the short run, most short-run production has other variable inputs, too. Waldo's TexMex Taco World undoubtedly has an assortment of other variable inputs, all of which are part of variable cost--including meat, lettuce, sour cream, and jalapenos that make up the tacos; paper napkins, packaging material, and plastic utensils that customers use when consuming the tacos; and electricity and other energy sources needed to prepare the tacos. When Waldo's make more tacos, they incur a greater cost for these inputs.

Total and Average

The two most common manifestations of variable cost are total variable cost and average variable cost.
  • Total Variable Cost: This is the total amount of variable cost incurred in the production of a good. It combines all variable opportunity cost.

  • Average Variable Cost: This is the per unit variable cost, which is calculated by dividing total variable cost by the quantity of output produced.

<= VALUE IN USEVARIABLE INPUT =>


Recommended Citation:

VARIABLE COST, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2018. [Accessed: April 25, 2018].


Check Out These Related Terms...

     | fixed cost | total variable cost | total variable cost curve | average variable cost | average variable cost curve | total cost | total cost curve | total fixed cost | total fixed cost curve | average cost | average total cost | marginal cost |


Or For A Little Background...

     | opportunity cost | fixed input | production inputs | production | production cost | business | factors of production | microeconomics | short-run production analysis | law of diminishing marginal returns | marginal returns | marginal analysis |


And For Further Study...

     | average fixed cost | total cost and marginal cost | total cost curves | total variable cost and total product | legal business organizations | firm objectives | opportunity cost, production possibilities | profit | normal profit | profit maximization |


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