Question

How do costs vary in response to changes in the quantity of a variable input? In your own words. 250 words

Answer 1

The variable inputs are the inputs whose employment depends on the volume of output or production. If the volume of production is required to increase, the demand for variable inputs increases, and vice versa. The toatl amount of money spend on variable inputs are called variable costs of production.The higher the employment of variable inputs, the higher will be the variable cost, and vice versa. The total cost of production is the sum of fixed cost and variable cost. We know that in short-run, the fixed cost remains constant for all levels of output. In long-run, all costs are variable costs.If the quantity of variable inputs changes, the variable cost changes, and then the total cost also changes. The total cost of production is directly related to the employment of the variable inputs, i.e., if the employment or quantity of variable input rises, the total cost of production also rises, and vice versa. Now, if the quantity of variable inputs changes, then the average variable cost, i.e., total variable cost per unit of output,  also changes. Again, the change of the average variable cost of production changes the average total cost of production. The marginal cost of production is the change of total cost for the chane of an additional unit of output. Now, as the fixed cost remains constant, so the marginal cost depends on the variable cost of production, and not the fixed cost. So if the quantity of the variable input changes, then the marginal cost also changes. The marginal cost is the additional cost(variable factor price) for recruiting an additional variable input. Thus, we see that the variable cost, total cost, average variable cost, average total cost, and marginal cost vary in response to changes in the quantity of a variable input.

____________________________________________________________