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What is the relationship between tvc, tfc and tc.explain with schedule and diagram |
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Answer» (i) TC is divided into two parts TFC and TVC such that TC = TFC + TVC.(ii) TFC is the overhead cost and it remains constant or fixed WHATEVER be the level of output. TFC curve is a HORIZONTAL line parallel to the x-axis.(iii) TVC is cost due to increased USE of variable factors like raw material, labour, etc. TVC is inverse S-shaped starting from the origin due to law of variable proportion.(iv) TC is aggregate of TFC and TVC. TC curve is inverse S-shaped starting from the level of fixed cost. The reason behind it shape is the law of variable proportion |
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