Hi, Im offering economics help in Homework Forum :D
Hi there. I've a real life question up for answerings. In Economics, one learns that all fixed costs in the long run become variable costs. so how then, is the cost of a 3-day chalet (fixed cost) converted to a variable cost? Also, if the more people that goes for the chalet, the cheaper it is for each person. In other words, the average cost per person falls. This works on the same principles as economies of scale, but is there a term for it? Lol I know my question sounds weird but just curious. Thanks!
the only time the chalet cost is variable cost is when the chalet cost is a variable.
for example, for your chalet stay, if there is only a need for a chalet house, the cost of the chalet house is fixed, because no matter how many people go to the chalet, the cost of the chalet is still the same, in another word, FIXED.
If the number of chalet house changes when there is a change in number of people going to the chalet, then the cost of the chalet is a variable cost.
Originally posted by chuinn:Hi, Im offering economics help in Homework Forum :D
ok. tell me about the sub prime crisis.
Oh yeah! I kept thinking that chalet cost is always fixed but in actual fact in the long run, a chalet would become more price elastic due to the presence of more substitutes, hence chalet cost will change (be lowered). In this case, it is a variable cost. Am I right? Please correct me if I'm wrong. haha thanks!
Originally posted by Juxtapose93:Oh yeah! I kept thinking that chalet cost is always fixed but in actual fact in the long run, a chalet would become more price elastic due to the presence of more substitutes, hence chalet cost will change (be lowered). In this case, it is a variable cost. Am I right? Please correct me if I'm wrong. haha thanks!
Fixed cost does not mean the price would not change. Price would always change. Fixed cost is a relative term. It needs to the compared with something. For example, the cost of the chalet (assuming that there is only one chalet house) is still the same no matter how many people go the the chalet.
Only when the cost of the chalet varies with the number of people going to the chalet (like maybe, the more people the more chalet houses), then it could be considered as a variable cost.
Doesn't fixed cost always become variable cost in the long run? How is it so in the case of the chalet?
Originally posted by Juxtapose93:Doesn't fixed cost always become variable cost in the long run? How is it so in the case of the chalet?
From the little I know about A level econs, fixed cost will always stay as fixed cost in the long run.
Originally posted by Juxtapose93:Doesn't fixed cost always become variable cost in the long run? How is it so in the case of the chalet?
refer to definition of fixed cost in economics.
Originally posted by eagle:From the little I know about A level econs, fixed cost will always stay as fixed cost in the long run.
Actually fixed costs are costs that will stay fixed in the short run.
Cos long run is defined as time after which all factors, including costs become variables.
Originally posted by 16/f/lonely:
Actually fixed costs are costs that will stay fixed in the short run.Cos long run is defined as time after which all factors, including costs become variables.
oh ya
that point I forgotten
you are right :D
Fixed costs are only valid in the short-run. If you invite more people over to the chalet and the AC of each person goes down, that's refering to spreading of overheads. It's not exactly EOS as by defination, EOS only occurs in the Long Run where all costs are variable.