# What is the relationship between average cost and marginal cost Explain with diagram?

Arinjay Academy » Economics Class 11 » Relationship Between Total Cost Marginal Cost and Average Cost Class 11 NotesRelationship Between Total Cost Marginal Cost and Average Cost C

Arinjay Academy » Economics Class 11 » Relationship Between Total Cost Marginal Cost and Average Cost Class 11 Notes

## Relationship Between Total Cost Marginal Cost and Average Cost

There are several types of short run costs like Average Cost (AC), Marginal Cost (MC) and Total Cost (TC). There exists a close relationship between the various types of short run costs. Let us look into the relationship between the different types of short run costs.TopicRelationship between Total Cost Marginal Cost and Average CostSubjectMicroeconomicsCategoryCBSE Class 11 Notes

## Relationship Between Total Cost and Marginal Cost

The Relationship Between Total Cost and Marginal Cost is that the marginal cost is the addition to total cost when one more unit of output is produced. When TC rises at a diminishing rate, MC declines. As the rate of increase of TC stops diminishing, MC is at its minimum point. When the rate of increase in total cost starts rising, the marginal cost increases. This concept can be better understood from the figure given below.

As we can see from the graph given above, when TC rises at a diminishing rate till point D, MC declines. MC reaches its minimum point at point E. When the rate of increase of TC starts rising after point d, MC also starts increasing after point E.

## Relationship Between Average Cost and Marginal Cost

Both Average Cost and Marginal cost are derived from total cost. Average cost refers to total cost per unit output and marginal cost refers to addition to total cost when one more unit of output is produced. Also, both MC and AC curves are U-shaped due to the Law of Variable Proportions. The relationship between Average Cost and Marginal Cost can be better illustrated through the following schedule and diagram.OutputTotal CostAverage CostMarginal Cost01211818622211432795436996479.4011

When MC is less than AC, AC falls with increase in output, i.e. till 3 units of output. AS MC becomes equal to AC, i.e. when MC curve intersects the AC curve, AC is constant and at its minimum point. When MC is more than AC, AC rises with increase in output, i.e. from 5 units of output. Thereafter, both AC and MC rise, but MC increases at a faster rate as compared to AC. As a result MC curve us steeper than the AC curve.

### Producer Behaviour and Supply

• Concept of Production Function
• Total Product, Marginal Product & Average Product
• Law of Variable Proportion
• Relationship Between Total Product Average Product and Marginal Product
• Cost Concept in Economics
• Short run cost
• Relationship between Total Cost Marginal Cost and Average Cost
• What is Revenue
• Revenue curve under perfect competition
• Producers Equilibrium
• Concept of supply
• Supply Schedule
• Supply Curve
• Determinants of Supply
• Law of Supply
• Movement along the supply curve
• Shift in Supply Curve
• Price Elasticity of Supply

### 1 thought on Relationship Between Total Cost Marginal Cost and Average Cost Class 11 Notes

hemalatha godelaOctober 27, 2021 at 11:05 pm

can you expain me realation between tvc and avcReply