Revenue Function And Cost Function

In symbols π r c p q f v q.

Revenue function and cost function. Revenue function multiply the output level by the price function. Cost function c x total cost of producing the units. The profit function is just the revenue function minus the cost function. Essentially the average cost function is the variable cost per unit of 0 30 plus a portion of the fixed cost allocated across all units.

Marginal revenue r x the derivative of r x. 3 the profit a business makes is equal to the revenue it takes in minus what it spends as costs. For low volumes there are few units to spread the fixed cost so the average cost is very high. Profit income cost.

Note we are measuring economic cost not accounting cost. Profit r c. C 40 000 0 3 q where c is the total cost. For our simple lemonade stand the profit function would be.

Since profit is the difference between revenue and cost the profit functions the revenue function minus the cost function. P x r x c x marginal is rate of change of cost revenue or profit with the respect to the number of units. The equation for the cost function is. Profit function p x total income minus total cost.

Profit 0 50 x 50 00 0 10 x 0 40 x 50 00. To obtain the cost function add fixed cost and variable cost together. This means differentiate the cost revenue or profit. 2 a business costs include the fixed cost of 5000 as well as the variable cost of 40 per bike.