{"id":3807,"date":"2020-03-04T15:50:38","date_gmt":"2020-03-04T15:50:38","guid":{"rendered":"https:\/\/commerceiets.com\/?p=3807"},"modified":"2020-03-04T15:50:38","modified_gmt":"2020-03-04T15:50:38","slug":"traditional-theory-of-cost","status":"publish","type":"post","link":"https:\/\/commerceiets.com\/traditional-theory-of-cost\/","title":{"rendered":"TRADITIONAL THEORY OF COST"},"content":{"rendered":"\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title \" >Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/commerceiets.com\/traditional-theory-of-cost\/#TRADITIONAL_THEORY_OF_COST\" title=\"TRADITIONAL\nTHEORY OF COST\">TRADITIONAL\nTHEORY OF COST<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/commerceiets.com\/traditional-theory-of-cost\/#SHORT-RUN_TRADITIONAL_THEORY_OF_COST\" title=\"SHORT-RUN TRADITIONAL THEORY OF COST\">SHORT-RUN TRADITIONAL THEORY OF COST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/commerceiets.com\/traditional-theory-of-cost\/#TOTAL_COST\" title=\"TOTAL COST\">TOTAL COST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/commerceiets.com\/traditional-theory-of-cost\/#AVERAGE_COST\" title=\"AVERAGE COST\">AVERAGE COST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/commerceiets.com\/traditional-theory-of-cost\/#MARGINAL_COST\" title=\"MARGINAL COST\">MARGINAL COST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/commerceiets.com\/traditional-theory-of-cost\/#LONG_RUN_TOTAL_COST\" title=\"LONG RUN TOTAL COST\">LONG RUN TOTAL COST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/commerceiets.com\/traditional-theory-of-cost\/#LONG_RUN_AVERAGE_COST\" title=\"LONG RUN AVERAGE COST\">LONG RUN AVERAGE COST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/commerceiets.com\/traditional-theory-of-cost\/#LONG_RUN_MARGINAL_COST\" title=\"LONG RUN MARGINAL COST\">LONG RUN MARGINAL COST<\/a><\/li><\/ul><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h1 class=\"has-text-align-center wp-block-heading\" id=\"traditional-theory-of-cost\"><span class=\"ez-toc-section\" id=\"TRADITIONAL_THEORY_OF_COST\"><\/span><strong>TRADITIONAL\nTHEORY OF COST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h1>\n\n\n\n<p>Traditional theory distinguishes between the short run\nand the long run. The short run is the period during which some factors is\nfixed; usually capital equipment and entrepreneurship are considered as fixed\nin the short run.<\/p>\n\n\n\n<p>The long run is the period over which all factors become\nvariable.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"short-run-traditional-theory-of-cost\"><span class=\"ez-toc-section\" id=\"SHORT-RUN_TRADITIONAL_THEORY_OF_COST\"><\/span><strong>SHORT-RUN TRADITIONAL THEORY OF COST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>According\nto the traditional theory of the costs, the costs are divided into three types:<\/p>\n\n\n\n<ul><li>Total Cost<\/li><li>Average Cost <\/li><li>Marginal Cost<\/li><\/ul>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"total-cost\"><span class=\"ez-toc-section\" id=\"TOTAL_COST\"><\/span><strong>TOTAL COST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Total <a href=\"https:\/\/commerceiets.com\/concept-of-costs\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"cost (opens in a new tab)\">cost<\/a> is the total expenditure incurred by a firm during the production process. Total cost will change with the change in the ratio of output to input. Such changes may be the result of the changes in the efficiency of conversion process or changes in the prices of inputs. Total cost is a positively sloped curve.&nbsp;<\/p>\n\n\n\n<p>Total cost to a producer for the various levels of output\nis the sum of total fixed cost and total variable cost, i.e., <\/p>\n\n\n\n<p>TC = TFC + TVC. <\/p>\n\n\n\n<p><strong>TOTAL FIXED COST: <\/strong>Total fixed costs refer to those costs which are unable to vary. For example: land, buildings, machinery etc. Even the output is zero fixed costs will be there. Because, this cannot be variable with respect to the level of production. So, it is also called invariable cost. Since fixed costs are fixed or rigid it can be represented through a curve having horizontal shape to output axis. This can be shown with the help of following diagram:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"171\" height=\"162\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-5.png\" alt=\"TRADITIONAL THEORY OF COST\" class=\"wp-image-3809\"\/><figcaption><strong>TRADITIONAL THEORY OF COST<\/strong><\/figcaption><\/figure>\n\n\n\n<p><strong>TOTAL VARIABLE COST: <\/strong>Variable cost is incurred on the employment of variable factors like raw materials, direct labour, power, fuel, transportation, sales commission, depreciation charges associated with wear and tear of assets, etc. It varies directly with output.The curve of variable cost can be shown as follows:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-6-1.png\" alt=\"\" class=\"wp-image-3810\"\/><figcaption><strong>TRADITIONAL THEORY OF COST<\/strong><\/figcaption><\/figure>\n\n\n\n<p>From the curves of fixed cost and variable costs, the total cost can be derived as follows:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"168\" height=\"150\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-7.png\" alt=\"\" class=\"wp-image-3811\"\/><figcaption><strong>TRADITIONAL THEORY OF COST<\/strong><\/figcaption><\/figure>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"average-cost\"><span class=\"ez-toc-section\" id=\"AVERAGE_COST\"><\/span><strong>AVERAGE COST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Average total cost is the sum of the average fixed cost\nand average variable cost. Alternatively, ATC is computed by dividing total\ncost by the number of units of output.<\/p>\n\n\n\n<p>Therefore,<\/p>\n\n\n\n<p>ATC or AC = AFC + AVC<\/p>\n\n\n\n<p>=TC\/Q<\/p>\n\n\n\n<p>Average cost is also known as unit cost, as it is cost per unit of output produced. It can be shown as follows:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"284\" height=\"184\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-8.png\" alt=\"\" class=\"wp-image-3812\"\/><figcaption><strong>TRADITIONAL THEORY OF COST<\/strong><\/figcaption><\/figure>\n\n\n\n<p>Average cost is inclusive of Average Fixed Cost and\nAverage Variable Cost.<\/p>\n\n\n\n<p><strong>AVERAGE FIXED COST: <\/strong>AFC is the average of total fixed costs. AFC can be obtaining by dividing the total fixed cost by total quantity of output each time produced. Mathematically,<\/p>\n\n\n\n<p>AFC = TFC \/quantity<\/p>\n\n\n\n<p>TFC will be always fixed. So AFC will reduce and never reaches zero.&nbsp;Its curve is as follows:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"227\" height=\"230\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-9.png\" alt=\"\" class=\"wp-image-3813\"\/><figcaption><strong>TRADITIONAL THEORY OF COST<\/strong><\/figcaption><\/figure>\n\n\n\n<p><strong>AVERAGE VARIABLE COST: <\/strong>AVC is the average of total variable cost. It can be find out by using the following formula.<\/p>\n\n\n\n<p>AVC = TFC \/ quantity<\/p>\n\n\n\n<p>AVC curve will be a \u2018U\u2019 shaped which is showing that when the output is raises the cost will decline, but after a certain level the cost starts to increases. That is why due to the variable proportion.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"247\" height=\"211\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-10.png\" alt=\"\" class=\"wp-image-3814\"\/><figcaption><strong>TRADITIONAL THEORY OF COST<\/strong><\/figcaption><\/figure>\n\n\n\n<p><strong>WHY AC IS U SHAPED?<\/strong><\/p>\n\n\n\n<p>In the short-run average cost curves are of U-shape. It\nmeans, initially it falls and after reaching the minimum point it starts rising\nupwards. It can be on account of the following reasons:<\/p>\n\n\n\n<p><strong>1. BASIS OF AVERAGE FIXED COST\nAND AVERAGE VARIABLE COST<\/strong><\/p>\n\n\n\n<p>Average cost is the aggregate of average\nfixed cost and average variable cost (AC = AFC + AVC). To begin with, as\nproduction increases, initially the average fixed cost and average variable\ncost falls. But after a minimum point, average variable cost stops falling but\nnot the average cost. It is due to this reason that average variable cost\nreaches the minimum before AC.<\/p>\n\n\n\n<p>The point, where AC is minimum is called the\noptimum point. After this point, AC begins to rise upward. The net result is\nthe increase in AC. Therefore, it is only due to the nature of AFC and AVC that\nAC first falls, reaches minimum and afterwards starts rising upward and hence\nassume the U-shape.<\/p>\n\n\n\n<p><strong>2. BASIS OF THE LAW OF VARIABLE\nPROPORTION<\/strong><\/p>\n\n\n\n<p>The law of variable proportion also results\nin U-shape of short run average cost curve. If in the short period variable\nfactors are combined with a fixed factor, output increases in accordance with\nthe law of variable proportions. In other words, the law of \u2018Increasing\nReturns\u2019 applies.<\/p>\n\n\n\n<p>Similarly, if employ more and more variable\nfactors are employed with fixed factors the law of Diminishing Returns is said\nto apply. Thus, it is due to the law of variable proportions that the average\ncost curve assumes the shape of U.<\/p>\n\n\n\n<p><strong>3. INDIVISIBILITIES OF THE\nFACTORS<\/strong><\/p>\n\n\n\n<p>Another reason due to which the\naverage cost curve forms U-shape is the indivisibilities of factors. When in\nthe short-run a firm increases its production due to indivisibilities of fixed\nfactors, it gets various internal economies. It is these economies which cause\nthe average cost curve to fall in the initial stage. Generally, there are three\ntypes of internal economies which help to bring down the cost viz., technical\neconomies, marketing economies and managerial economies.<\/p>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"marginal-cost\"><span class=\"ez-toc-section\" id=\"MARGINAL_COST\"><\/span><strong>MARGINAL COST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It is the addition to total cost\nrequired to produce one additional unit of a commodity. It is measured by the\nchange in total cost resulting from a unit increase in output. For example, if\nthe total cost of producing 5 units of a commodity is Rs. 100 and that of 6 units\nis Rs. 110, then the marginal cost of producing 6<sup>th<\/sup>&nbsp;unit of. Commodity is Rs. 110 \u2013 Rs. 100 = Rs.\n10. The formula for marginal cost is<\/p>\n\n\n\n<p>MC<sub>n<\/sub>&nbsp;=TC<sub>n<\/sub>&nbsp;\u2013TC<sub>n-1,<\/sub><\/p>\n\n\n\n<p>It means that marginal, cost of \u2018n\u2019 units of\noutput (MC<sub>n<\/sub>) can be obtained\nby subtracting the total cost of production of \u2018n-l\u2019 units (TC<sub>n-1<\/sub>) from the\ntotal cost of production of \u2018n\u2019 units (TC<sub>n<\/sub>). Alternatively, marginal cost can be expressed as<\/p>\n\n\n\n<p>MC=\u2206TC\/\u2206Q.<\/p>\n\n\n\n<p>Here, \u2206TC stands for change in total cost and \u2206Q stands\nfor change in total output.<\/p>\n\n\n\n<p>This can be shown as follows:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"240\" height=\"186\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-11.png\" alt=\"\" class=\"wp-image-3815\"\/><figcaption><strong>TRADITIONAL THEORY OF COST<\/strong><\/figcaption><\/figure>\n\n\n\n<p class=\"has-text-align-center has-green-background-color has-background\"><strong>LONG RUN COSTS OF TRADITIONAL THEORY<\/strong><\/p>\n\n\n\n<p>In the long run all factors are assumed\nto become variable. Long-run cost curve is a planning curve, in the sense that\nit is a guide to the entrepreneur in his decision to plan the future expansion\nof his output. The long-run average-cost curve is derived from short-run cost\ncurves.&nbsp;<\/p>\n\n\n\n<p>The long run costs are categorised as follows:<\/p>\n\n\n\n<ul><li>Long run total cost<\/li><li>Long run average cost<\/li><li>Long run marginal cost<\/li><\/ul>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"long-run-total-cost\"><span class=\"ez-toc-section\" id=\"LONG_RUN_TOTAL_COST\"><\/span><strong>LONG RUN TOTAL COST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Long run Total Cost (LTC) refers to the minimum cost at\nwhich given level of output can be produced. According to Leibhafasky, \u201cthe\nlong run total cost of production is the least possible cost of producing any\ngiven level of output when all inputs are variable.\u201d LTC represents the least\ncost of different quantities of output. LTC is always less than or equal to\nshort run total cost, but it is never more than short run cost.<\/p>\n\n\n\n<p>This can be shown as follows:<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"247\" height=\"212\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-12.png\" alt=\"\" class=\"wp-image-3816\"\/><figcaption><strong>TRADITIONAL THEORY OF COST<\/strong><\/figcaption><\/figure>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"long-run-average-cost\"><span class=\"ez-toc-section\" id=\"LONG_RUN_AVERAGE_COST\"><\/span><strong>LONG RUN AVERAGE COST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Long run Average Cost (LAC) is equal to long run total costs divided by the level of output. The derivation of long run average costs is done from the short run average cost curves. In the short run, plant is fixed and each short run curve corresponds to a particular plant. The long run average costs curve is also called planning curve or envelope curve as it helps in making organizational plans for expanding production and achieving minimum cost.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-13-1.png\" alt=\"\" class=\"wp-image-3817\"\/><figcaption><strong>TRADITIONAL THEORY OF COST<\/strong><\/figcaption><\/figure>\n\n\n\n<h3 class=\"has-text-align-center wp-block-heading\" id=\"long-run-marginal-cost\"><span class=\"ez-toc-section\" id=\"LONG_RUN_MARGINAL_COST\"><\/span><strong>LONG RUN MARGINAL COST<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Long run Marginal Cost (LMC) is defined as added cost of producing an additional unit of a commodity when all inputs are variable. This cost is derived from short run marginal cost. On the graph, the LMC is derived from the points of tangency between LAC and SAC.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2020\/03\/image-14-1.png\" alt=\"\" class=\"wp-image-3818\"\/><figcaption><strong>TRADITIONAL THEORY OF COST<\/strong><\/figcaption><\/figure>\n\n\n\n<figure class=\"wp-block-table\"><table><tbody><tr><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><td><strong>Also Study<\/strong><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/demand\/\">Theory of Demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-demand\/\">Law of Demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/demand-function\/\">Demand Function<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/exceptions-of-law-of-demand\/\">Exceptions of law of demand<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/elasticity-of-demand\/\">Elasticity of demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/change-in-demand\/\">Change in demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/price-elasticity-of-demand\/\">Price elasticity of demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-law-of-demand-and-elasticity-of-demand\/\">Law of demand Vs Elasticity of demand<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/factors-affecting-price-elasticity-of-demand\/\">Factors affecting price elasticity of demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/production-function\/\">Production function<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-short-run-long-run-production-function\/\">Short run vs long run production function<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-variable-proportions\/\">Law of variable proportions<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/types-of-demand\/\">Types of demand<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/managerial-economics\/\">Managerial economics<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/characteristics-of-managerial-economics\/\">Characteristics of managerial economics<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/scope-of-managerial-economics\/\">Scope of managerial economics<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/utility-analysis\/\">Utility analysis<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-diminishing-marginal-utility\/\">Law of diminishing marginal utility<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-equi-marginal-utility\/\">Law of equi marginal utility<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/consumer-equilibrium\/\">Consumers Equilibrium<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/indifference-curve-analysis\/\">Indifference curve analysis<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/consumer-equilibrium-using-indifference-curve-analysis\/\">Consumer equilibrium using indifference curve analysis<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/relationship-between-tp-ap-and-mp\/\">Relationship between TP, AP and MP<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-increasing-returns\/\">Law of increasing returns<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/law-of-diminishing-returns\/\">Law of diminishing returns<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/law-of-constant-returns\/\">Law of constant returns<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/returns-to-scale\/\">Returns to Scale<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/economies-and-diseconomies-of-scale\/\">Economies and diseconomies of scale<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/concept-of-costs\/\">Concept of costs<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/relationship-between-ac-and-mc\/\">Relationship between AC and MC<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/traditional-theory-of-cost\/\">Traditional theory of costs<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/modern-theory-of-cost\/\">Modern theory of costs<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/explicit-vs-implicit-costs\/\">Explicit vs Implicit costs<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/revenue\/\">Revenue<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/perfect-competition\/\">Perfect competition<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/monopoly-meaning\/\">Monopoly<\/a>&nbsp;<\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/price-discrimination\/\">Price discrimination<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/difference-between-perfect-competition-and-monopoly\/\">Difference between perfect competition and monopoly<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/perfect-and-monopolistic-competition\/\">Perfect Vs Monopolistic competition<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/monopoly-and-monopolistic-competition\/\">Monopoly and monopolistic competition<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/product-differentiation-strategy\/\">Product differentiation strategy<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/monopolistic-competition\/\">Monopolistic competition<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/national-income-in-india\/\">National Income in India<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/measurement-of-national-income\/\">Measurement of national income in India<\/a><\/td><\/tr><tr><td><a href=\"https:\/\/commerceiets.com\/consumption-function\/\">Consumption function<\/a><\/td><td><a href=\"https:\/\/commerceiets.com\/keynesian-psychological-law-of-consumption\/\">Keynes Psychological law of consumption<\/a><\/td><td><\/td><td><\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/www.linkedin.com\/in\/kajal-mahajan-7549b2197\/\" target=\"_blank\" rel=\"noreferrer noopener\">CONNECT ON LINKEDIN<\/a><\/div>\n<\/div>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"266\" src=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize-1024x266.jpg\" alt=\"TRADITIONAL THEORY OF COST\" class=\"wp-image-787\" srcset=\"https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize-1024x266.jpg 1024w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize-300x78.jpg 300w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize-768x199.jpg 768w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize-1536x398.jpg 1536w, https:\/\/commerceiets.com\/wp-content\/uploads\/2019\/04\/cropped-Presentation-resize.jpg 1920w\" sizes=\"(max-width: 1024px) 100vw, 1024px\" \/><figcaption>TRADITIONAL THEORY OF COST<\/figcaption><\/figure>\n","protected":false},"excerpt":{"rendered":"<p>TRADITIONAL THEORY OF COST Traditional theory distinguishes between the short run and the long run. The short run is the period during which some factors is fixed; usually capital equipment and entrepreneurship are considered as fixed in the short run. The long run is the period over which all factors become variable. SHORT-RUN TRADITIONAL THEORY&#8230;<\/p>\n<p class=\"more-link-wrap\"><a href=\"https:\/\/commerceiets.com\/traditional-theory-of-cost\/\" class=\"more-link\">Read More<span class=\"screen-reader-text\"> &ldquo;TRADITIONAL THEORY OF COST&rdquo;<\/span> &raquo;<\/a><\/p>\n","protected":false},"author":2,"featured_media":3819,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[113,92],"tags":[],"_links":{"self":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3807"}],"collection":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/comments?post=3807"}],"version-history":[{"count":0,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/posts\/3807\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media\/3819"}],"wp:attachment":[{"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/media?parent=3807"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/categories?post=3807"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/commerceiets.com\/wp-json\/wp\/v2\/tags?post=3807"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}