Difference between fixed cost and variable cost:
Basis | Fixed cost | Variable cost |
Definition | The cost incurred by the fixed factors of production is called the fixed cost. | The cost incurred by the variable factor of production is called variable cost. |
Output | It does not change with output. | It changes with output. |
Relation | It is related to the fixed factor. | It is related to the variable factor. |
Continuation | A firm can continue its production even if the fixed cost is not covered in the short run. | Production will be continued by a firm only if it’s variable cost is covered. |
Examples | Rent, salaries of permanent staff, interest on capital, insurance cost, etc. | Cost of raw materials, wages of casual labor, expenses on petty overheads, etc. |
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