The difference between fixed and variable costs
Fixed costs stay the same no matter how much a firm produces. Variable costs rise and fall as output changes.
Formula
TC = FC + VC
Real World
Ryanair pays fixed costs like aircraft lease payments regardless of how full its planes are, but fuel and crew costs rise with every extra flight operated — making fuel a classic variable cost.
Exam Focus
When 'explain' is the command word, state the definition then link to how the cost behaves as output changes — not just what it is.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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