A fixed cost is independent of output. A variable cost is dependent of output.
A fixed cost is where a company has to pay for the business expenses. For example a company has to pay rent and utility bills. It's expenses are not dependent on goods or services from the company or business. A variable cost is indirect costs. It changes with proportion or a relation to a company's business activity. Some examples of variable costs are packaging, energy costs, and raw materials.
2. Discuss a supply factor that can lead to more expensives prices for taco villa?
When the supply of a certain product for taco villa goes down due to the lack of labor or certain animals needed for that particular supply, that means the demand will go up as the supply is down. This will directly lead to the prices being more expensive for taco villa.
Andrew, you are correct to say that fixed costs are independent of output and variable costs aren't but your explanation that follows does not support this. I am not convinced by what you wrote that you fully understand the nature of a fixed cost or a variable cost.
ReplyDeleteAlthough I think that you understand why the price for a taco can rise, you are not communicating clearly.
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