00:00 Good students, standing before you here is Mr. Kenny and how we're taking you economics

00:20 on a very interesting topic which I call cost concepts, cost concepts, okay?

00:28 This is a very interesting topic that you need to learn as at now that you are in a

00:34 world in the same country level.

00:37 So without wasting time, what are those things we shall be looking at on their cost concepts?

00:42 And what exactly do we mean by the word cost?

00:47 Whenever you hear the word cost, what does it mean?

00:53 Costs, as the name implies, refers to the economic value that is attached to a particular

01:01 product or service.

01:03 The value that is attached to a particular product or word service, what are we talking

01:09 about?

01:10 What exactly are we saying?

01:12 When you go to the market and then your purchase was in Maca.

01:18 Do we agree with me that that Maca you have purchased has a cost.

01:24 The Maca is purchased for 150.

01:28 That is not the cost.

01:31 The selling price is totally different from the cost price.

01:35 Before the producer can release the Maca at rate of 150, believe me, the profit must have

01:42 been embedded in the selling price.

01:44 So what exactly does it cost, that producer to produce the Maca, when you want to know

01:51 the overall cost, you need to start considering the cost of the ink, the cost of the container

01:57 itself, the cost of the sticker, all these put together, its work gives best to the cost.

02:04 And when we say cost in economics, we are simply referring to what the cost of production.

02:11 Yes, cost of production, if you have to produce bread, okay, you need to consider the cost

02:19 of flour, you need to consider the cost of words of sugar, you need to consider the cost

02:24 of yeast, you need to consider the cost of butter, all these are words are cost that must

02:31 be words considered before you can have the words the overall finished products.

02:37 So the actual amount you have spent, the value that a particular commodity actually

02:43 works, that is what we call cost, and in economics, we are referring to the cost of production.

02:50 And when we say cost of production, what does it mean, this really refers to as well as

02:56 the sum total payments, take a look, the sum total payments that is made to all the factors

03:03 of words production.

03:05 Are we there?

03:07 All the sum total payments, sum total words payments, that is made to the factors of

03:16 production.

03:17 And what are the factors of production?

03:19 We have words, you have land, you have labor, you have capital, and of course you have

03:28 the word ends up in your, now the cost you include on land, the cost you include on

03:35 label, the cost you include on capital, because you cannot produce without all these factors.

03:41 So the total amount you have spent, so bring land, label and capital together for you to

03:48 produce a product, that overall cost is all called cost of production.

03:54 Are we together?

03:55 It's the first word, the sum total payments, made to the factors of production.

04:00 Land, fine, you define land as word as a free gift of nature, but that also means the reward

04:08 will not be paid for the usage of such land.

04:11 Of course, when I like it or not, rents must be paid.

04:15 On label, you can also employ a label for working for you free of charge, you need to pay

04:20 them either with this or what, salary, that's the cost you are incurring.

04:24 Then of course, capital, that is the word interest you are going to generate for you to invest

04:29 in your money into a particular world, business, that's the reward.

04:33 So the overall amount you have incurred in bringing land, label and capital together, that

04:39 is all called cost of world production.

04:42 Are we together?

04:44 So without wasting time, let's go straight to the world.

04:47 So the economies and account points of view, how does an economy's view cost?

04:54 How does an account count view cost, do they view cost in the same perspective?

04:59 No.

05:00 Do we agree to mean that, though an account cost is viewed in terms of world's money costs?

05:08 And when we say money costs, what does it mean?

05:11 That is, the actual amount of spend to buy a particular commodity.

05:17 The actual amount of spend to buy a commodity.

05:21 Like for example, if you as an accountant or even an accountant, and I decided to use

05:28 115 error to purchase world in Maca, which I want to use in the classroom to teach you,

05:36 that's Maca I have purchased.

05:38 It was amount 150 error, so that amount I have spent, which is 150, is worth the account

05:46 see as well money cost, that is, the actual amount spent to acquire a particular world

05:55 commodity.

05:56 Are we together?

05:57 Then, that is the way an accountant see cost.

06:01 How then does an economy see cost?

06:04 To an economist, cost is viewed in terms of opportunity cost.

06:09 When I say opportunity, what does it mean?

06:12 Opportunities cost is what means an expression of cost in terms of for going on an eternity.

06:19 That is, when you satisfy a particular wants, at the expense of another, what do I mean?

06:27 Don't forget, you as an individual, you want our own limitage.

06:33 Meaning, as human beings, our wants are many, but the resources to satisfy them are

06:38 all limited, so what do you need to do since you have limited wants and limited resources?

06:47 When I hear resources, I'm referring to art, money.

06:53 The money you need to get all your wants, they have all, they have scars, and that's one

06:58 of the one of the characteristic of money, relative scarcity.

07:03 Relative scarcity.

07:04 However, when I have this one on a 15-year-old with me, I can't either use it to buy a book

07:11 or a pen, as a student.

07:14 I need the two of these products.

07:17 I need a book, I need a pen, or get a TV market, I discovered that a book is worth.

07:23 The book actually worth a much worth 100 Naira.

07:29 And the pen itself worth a month, 80 Naira.

07:34 Tell me, as an economist, what will I do?

07:38 Or do I desire the two?

07:40 They are my ones, my ones, but my resources is just worth 150.

07:45 Now, the question is, can my resources acquired all these wants of my?

07:51 No, my resources is not enough to get all these desires I actually want.

07:55 So what do I need to do?

07:56 I need to make a choice.

07:58 I need to make a choice.

08:00 When I make a choice, I will decide to go for work, the book.

08:03 And they want to put it back to the pen.

08:04 I will have a bundle of the pen, that is, I will forego the pen.

08:08 When I forego the pen, it means that I have sacrificed the pen, in order to enable me

08:13 to buy the world, the book.

08:16 That pen I have forego is what economists refer to as well as opportunity calls, sacrificing

08:23 the particular ones at the expense of another.

08:27 So this is what the economists see as well as costs.

08:30 Don't forget, in summary, the accountant's cycles from the amount they are spent to buy

08:37 the products, which is 150.

08:39 But the economy's cycles from the angle of the item is unable to buy.

08:45 Which is what?

08:46 The pen.

08:47 Because these ones are many.

08:48 It needed a book, it needed a pen.

08:50 So it needs to work.

08:51 Make a choice.

08:52 One item that is unable to buy is what it refers to as well as cost.

08:58 So these are the accountants and the economist's points of view.

09:03 Accountant's cycles, in terms of money costs, economic cycles, in terms of opportunity calls.

09:09 Now, take note of these, in the example you may be asked, are not that mean for opportunity

09:13 calls?

09:14 Is what?

09:15 Real calls.

09:16 Please take note of that.

09:18 Real calls.

09:19 Or you call these words true cost.

09:23 Another name for opportunity calls is real calls or what true calls are we together?

09:29 Awesome.

09:30 So, briefly, let's proceed to the next level, and that's the types of calls that we have.

09:35 Types of calls that we have.

09:36 There are varieties of calls that we have in economics.

09:39 And the very first one, which I'm looking at, is the fixed calls.

09:43 When we say fixed calls, what does it mean?

09:45 This refers to the calls that does not change.

09:50 Calls that does not change are varies with the level of what outputs.

09:54 That is, irrespective of the level of production, fixed calls remain what constants.

10:02 When we say fixed calls, what are we talking about?

10:05 A good example is the cost of building.

10:09 The cost of machines.

10:11 The cost of motor vehicle.

10:14 Let me take building as a very good example.

10:16 If you purchase a building, and then the building actually works now, costs you 50,000

10:23 error.

10:24 Please take note.

10:25 It costs you 50,000 error.

10:29 And then you need to pay rents on that particular world's building.

10:35 If you are paying rents of 1/50 at the beginning, and you're using the building for walls for

10:40 a school, that is, you actually turn the school, I mean, the building to a school.

10:47 I assume the facilities in the school.

10:50 If the landlord wants to collect money, the following year, I'm already paying.

10:54 You need to pay in 1/50.

10:56 Probably when you are paying 1/50, the student adjusts the wall, adjust 30, because the school

11:02 adjusts the wall's commenced operations.

11:05 Is the new school?

11:06 The student adjusts 30 and you pay 150.

11:08 And then my question is, if the student should increase from 30 to 1,000, how much we used

11:15 to be paying as well as rents, it's still the same, 1/50, you are going to pay as well

11:22 as rents.

11:23 So there are most that are in children only fixed as a, which is the building, which remains

11:28 the same.

11:29 Now, let me ask you a question.

11:32 If the number of students should drop from 30, probably to 5, you only have 5 students

11:37 in the school.

11:38 The question is, with the landlord say, oh, because you have just 5 students, let me reduce

11:43 your rent.

11:44 No, that's not of his business.

11:46 You will see, continue to pay the same amount as well as rent, which is 1/50,000.

11:53 So irrespective of whatever you produce, irrespective of the number of students in the school,

11:58 your fixed cost remains constant, are we together?

12:01 So briefly, how do you calculate your fixed cost?

12:08 How do you calculate your fixed cost?

12:11 For you to calculate your fixed cost, there is a formula for it, you say your fixed cost,

12:17 which is also the same as well, which is also the same as total fixed cost, it's capital

12:24 used in the formula, total cost minus worth, variable cost, anytime, any day.

12:31 Now, how does the graph look like?

12:33 Take a look, this is the graph for fixed cost, you draw your x and y-axis, okay?

12:41 So, then you start from this middle, can you see?

12:45 You draw this line, can you see?

12:48 Then you call this, and see, f seems worth, fixed cost.

12:54 So this is how you draw the graph, it's very simple, first cost is set to be worth, it's

12:58 set to be horizontal to the x-axis, are we together, it's not more than that, okay?

13:04 Then let's move to the next one, please, and that's his worth, that's his variable cost.

13:09 When we say variable cost, it seems to mean the opposite of fixed cost, opposite of what

13:16 fixed cost, this is the cost that changes, these are cost that varies with the level of

13:23 output, that is, as you are incurring more, okay?

13:29 The cost will be changing, oh, let's assume you are actually working in the bakery, and

13:35 you are producing bread, do you want to tell me if you are to produce worth, you are to

13:39 produce worth, let's say, 50 loaves of bread, the cost is going to be 1000, for example,

13:49 if you know what to produce worth, 100 loaves of bread, do you want to

13:53 tell me you will also spend 1000 to produce 1000 loaves, no, you need to spend more money,

13:58 you need to incur more materials in order to produce worth 1000 loaves of bread.

14:04 So as the cost, as the quantity you are producing is increasing, the cost will be also increased,

14:10 so it changes, a good example is the cost of raw materials, which is the case I've given

14:15 to you on that bread, the cost of the level, if you want the level to work more for you,

14:19 you need to pay in either more and increasingly worth in its wages or salaries, you need

14:26 to incur more costs for it to get a better worth service, than the cost of where as well.

14:31 The cost of field is another good example of worth of a variable cost, and your variable

14:36 cost, what is the graph, look at the board, look at the board, this is your variable cost,

14:44 I will together, then you pick it from here, can you see, then you call this Vc, Vc means

14:52 what, variable cost, which means that as well, as your quantity is increasing, that is what

15:00 you are producing, as it is increasing, increasing, the cost you will be incurring, you also

15:06 be worth increasing, so that is a variable cost, that's a variable cost, so without wasting

15:14 time, let's move down to the next one, and that is what the total cost, total cost, and

15:20 what we say total cost, what does it mean, your total cost here, it said to be the world,

15:25 the combination of fixed cost and worth and variable cost, the cost that does not change,

15:35 that does not vary, with the level of output, no matter what you produce, this cost remains

15:41 the same, that is fixed cost, then the cost that changes, with your level of activities,

15:47 that changes, with your level of output being produced, this is your variable cost, so

15:52 when you combine the two, you match your fixed cost, and your variable cost, you match the

15:57 two together, it's to give us a whole core world, total cost, are we together, and how do

16:04 you calculate your worth, your total cost, please take note, your total cost here is going

16:10 to be worth, it's going to be fixed cost, plus worth, plus variable cost, okay, remember

16:17 the first one I get to you is worth, is fixed cost, fixed cost is because the world, total

16:22 cost, minus variable cost, then the second one is worth, variable cost itself, which is

16:28 because the world, total cost, minus worth, minus fixed cost, then the next one is worth,

16:35 total cost itself, which is worth, fixed cost, plus worth, plus variable cost, please take

16:44 note of that, take note of that, okay, take note of that, your worth, your total cost,

16:53 is equal to fixed cost, plus variable cost, take note of that, then how do I do the graph,

17:01 very easy, draw your x and y, exist, remember this is your worth, your fixed cost, right,

17:09 this is fixed cost, can you see, then you place it on this particular line, you draw it

17:15 up, can you see, this is your worth, your variable cost, okay, this is your variable cost,

17:24 this is your variable cost, okay, so draw it up, then you call this Vc, okay, so from here,

17:37 from here to this place, is worth, is fixed cost, then from here, like this to this place,

17:46 okay, is your worth, is your total cost, the combination of fixed cost and variable cost,

17:54 is not worth that, so without wasting time, let's move to the next one, and this is average

17:58 cost, average cost, when we say average cost, what does it mean, this simply refers to the cost

18:03 of production per unit of worth, output, cost of production per unit, when you say per unit

18:09 it means per one, what will it cost to produce a single unit of a community, let's assume

18:14 you are having a worth, a pure job business, is that so, no, you have how many worth, such

18:20 it in the world, in the back, just 20, now if you want to produce a single such it, what

18:26 will be the cost of producing one such it of worth of pure job, what will be the worth,

18:32 the cost, what will be the cost, so remember, let's assume, that's what, you are having on

18:41 an error, as the worth, as a cost of a bag, and then you know, you quantity you have in

18:47 the bag is worth, is 20, so for you to know the average cost of producing one, it's going

18:53 to be worth, it's going to be the total cost divided by worth, the quantity, that's it,

18:59 the cost of the old bag is worth, sorry, earned rent, okay, the cost of everything is worth

19:06 is earned rent, so you have one earned rent divided by worth, 20, so this gives us worth,

19:14 this gives us five, so that means the cost of producing was, the cost of producing one is

19:20 five, nine, so cost per units, cost per one, that's what we call our average cost, it's not

19:28 spent on that, okay, and I want you to take total of the secrets, because examinance can

19:32 be worth can be very four years times, okay, I want to show you a secret right now, and

19:38 on that way, questions can come in respect of words, in respect of these words, your average

19:45 cost is that they may not present it as average cost, okay, take notes, your average cost

19:51 at times can also be called words, can also be called average, total cost, are we together,

19:59 and your average total cost is what is said to be equals to what total cost divided by

20:04 words, quantity, are we together, total cost divided by quantity, then what's with the examinance

20:10 axiote, towards the complete for average fixed cost, what do you need to do, anything yet

20:17 average, just so you're going to divide by the quantity, so you pick the last two variables,

20:23 which is fixed cost, then the formula will have the word fixed cost over quantity, are we

20:30 together, now let's say the formula is average variable cost, that's why I gave you the

20:35 question, you have to calculate words, the average variable cost, so in calculation average

20:42 variable cost is the same approach, average variable cost will not be equal, just pick the

20:46 last two variables, which is what, VC, that's what it was, VC over quantity, are we together,

20:55 okay, so that's why you go about it, now without wasting time, the graph, very easy, just

21:02 draw your x and y axis, then you draw this, this represents your words, your average cost,

21:09 anytime, anything, are we together, then the next thing I'm going to show you is what is

21:17 that your average total cost is divided into many parts, two, you have what we call, the

21:24 average fixed cost and average variable cost, take note of that any time, any day, then finally

21:34 marginal cost, marginal cost, the marginal cost is set to be the cost of producing an extra

21:40 or additional units of a commodity, and to calculate our words, to calculate our

21:46 marginal cost, okay, the formula for calculated marginal cost is going to be worth, it's going

21:52 to be, you see, marginal cost is change in total cost, divided by words, change in quantity,

21:59 when we get to illustration, you will see exactly how we calculate this word, marginal

22:03 and words, and change in quantity, are we together, so the cost of producing extra units,

22:10 extra quantity of the produce, that's what we call marginal cost, I call this word, incremental

22:15 cost, anytime, anytime, any day, so ladies and gentlemen, let's move down to the next

22:20 level, and that's a table given to us here, look at this table, it gave us a sput of 1 to

22:27 6, total cost, average cost, and marginal cost, the total cost is given as words as 8, average

22:34 cost is also worth 8, then marginal cost is worth, it's dash, so observe, from here, I have

22:42 a, b, c, d, a, and f towards, to high, so we need towards, we need to get the missing figure,

22:55 how do they get this missing figure, a, b, c towards, to i, how do you calculate it, so without

23:04 wasting time, let's go to the words, to the calculation proper, okay, let's go to the

23:10 calculation proper, so without wasting time, look at the word, you have a, a for the word,

23:19 c, c, is that a so, c, c, so your c, c equals to what, equals to fixed cost plus word, plus

23:32 variable cost, is that a so, now if you look at this table, is there fixed cost, no,

23:39 is there variable cost, no, this missing formula cannot work, so you need to think of another

23:49 approach that you can use, please this is a secret that you must not sell anybody, and the

23:55 other approach, in calculating your words, your total cost, you see your total cost equals

24:00 to what, average cost, multiply by words, quantity, so what's the average cost, did you give

24:07 us average cost in the question, yes, what's the average cost, add that information A at

24:12 A, average cost as well, six, can you see, so your total cost, because to average cost is six,

24:19 multiply by words, the quantity, the quantity is the same thing as the output, so it trades

24:24 it to your A, okay, trades it to your A, what do you have, three, so six times three,

24:30 give us what, 18, and that's how you have this 18 here, I will together, then we move

24:37 to the next one, the next one here is what, is B, B is not giving, if you look at the question

24:44 very well, the first question is what's the output, is A, C at the minimum, so you cannot

24:51 answer this question, if you don't plot all this, your B is still the same thing applicable,

24:55 which is what, average cost, which is at six, right, multiply by words, five, that's give

25:00 us taxi, then our words, our C, average cost itself, don't forget, average cost equals to

25:07 T C over quantity, what is our T C, are we giving, yes, look at it, T C, okay, so T C, what's

25:17 your T C, 14, what's the quantity, two, so 14 divided by two, we give us what, seven,

25:25 another way, I'm having seven here, the next one is what, D, which is what, the same

25:29 up, the same approach, just say, 20 divided by four, you have words, five, okay, then you also

25:36 have the same thing, 48 divided by six, we have words, eight, okay, so then you go, you go

25:41 about it, and finally, your marginal costs, your marginal costs, what are they saying

25:47 there, didn't give us anything here, so you are, you can complete for your marginal costs,

25:51 very easy, you see your marginal costs, you said to be cost to change in total costs,

25:58 okay, over changing quantity, anything marginal, the first line is always dash, you can see,

26:05 here, for the first unit is dash, so you start from the second one, very easy, even without

26:10 capital it or you can do this, just go to your world, your total cost, trace it, trace it,

26:15 what do you have here, 14, so 14 minus eight, that will give us what, six, these minus these,

26:23 look at the formula, change in total cost, that is, this figure, minus whatever you have

26:28 before is 14 minus eight, over change in quantity, what's the quantity, it's two, minus whatever

26:36 you have before is two minus one, that's as well, six over one, and that's as well, six, so

26:43 then you have six, the next and applicable, go to your world, total cost, for it to get

26:47 marginal, you have to use your total cost, 18 minus 14, now give us what, four, okay, you

26:54 don't need to start burdening yourself with this, because when you say two minus one, three

26:58 minus two, four minus three, you still get the same value, so it's given us one, and anybody

27:03 whatever I want, you have the same value, so you have 18 minus 14, you have four, to get

27:10 two, I'll get two, 20 minus 18, you have four, two, the next one is what, this, I'll get

27:18 this, 30 minus 20, that will give us what, 10, and finally, 48, this is your total

27:24 cost, okay, so minus 30, all you have, you have 18, so ladies and gentlemen, this is

27:33 how you calculate it any time, any day, then, the question is actually, as what's output,

27:39 is AC at the minimum, go back to the table, as what's output is AC at the minimum, look at

27:48 it very well, look at it, take a look, life is easy with economics, whether I like it or not,

27:58 okay, so take a look, here on your marginal cost, you have this, you have AC, you have CC,

28:08 And you have your quantity. So look at this. Okay? Look at this. I have one, two, three, four, five, six. Okay? Then finally, I have eight, I have fourteen, I have eighteen, I have worked twenty, I have thirty, I have worked forty-eight. Here I have worked eight, I have seven, I have six.

28:38 I have worked five, I have six. Again, I have worked eight. Okay? Then here, it's dash. Anything imagine that the first one is dash. So here is what?

28:49 To get this is six, this minus this is what? It's four. Okay? This minus this is two, this is ten, and this is what? Eighteen.

28:59 Now, the question is not actually not at what output is AC at the minimum. This is AC. Okay? So the question is then actually not at what output is AC at the minimum? Where is your AC? This is AC?

29:17 When we say minimum, minimum is what? The lowest. So look at it. What's the lowest number we have here? The lowest is what? It's five.

29:25 Is that so? They are actually at what output is AC at the minimum? So you trace the minimum AC towards to output. What do you have here? Four. So your answer would be AC is at the minimum at output four. It's not more than that.

29:45 AC is at the minimum at output four. AC means what? Average cost. Then the next question says at what output is MC at the minimum? Again, this is MC. Look at the minimum. What is the minimum number you have here? Two.

30:03 At what output? Trace it to your output. Output is sent in as well quantity. Take note of that. Output is sent in as well quantity. So this is the minimum. Trace it to quantity. What do you have? Four. AC is also at the minimum with MC. Here, they say at what output is MC at the minimum? So you tell them MC is at the minimum at output four.

30:30 So you will give them the answer according to the demand of the question. The first one says as what output is AC at the minimum? This is your AC. What's the minimum AC up? Yes, five. Trace it to your quantity. Four. AC is at the minimum at output four. That's all. For MC, MC is at what? The minimum here, five. Trace it to your quantity. You also tell them MC is at the minimum at output four.

30:56 And the next one says as what output does AC starts to be great increasing? Start to be increasing. As what output as well? AC starts increasing. This is AC. It's 7, 6, 5. Why is it doing it? It's actually reducing. But the question says where does it start increasing?

31:22 From 5, it's increasing to 6. So as what's output? You trace it. Trace it. What do you have there? Five. So you will tell them AC starts increasing at output five. AC starts increasing at output five. I will put together. Then lastly, the question says as what's output does MC starts to be greater than AC?

31:46 From the starting English, as what's output? So MC starts to be greater. That's it. Where do we have MC? OK, to be greater than AC. This is your MC dash AC 8. So it does only this is 0 and this is 8. Is it greater? No. Look at the next one. 6, 7. Is MC greater than AC? No. This is 4.

32:14 6. Is MC greater than AC? No. 2. 5. Is MC greater than AC? No. 10. 6. MC here is greater than AC here. So where does it start? As what output? As what output? 5. So you tell them MC starts to be greater than AC as well as output five.

32:38 I will put together. And then last question says what is the maximum output? I expected to be shouting that over there. The maximum output. This is your output, right? As what is quantity? The maximum is what is highest. What's the highest number? 6. So you say the maximum output is 6. And it's not more than that. So ladies and gentlemen.

33:04 This is all. You need to know in the rest of the world. Of course concepts. OK. So I'll be giving you an assignment in the rest of this topic. And I want to lay your hands on past questions. I mean SSC past question.

33:20 Question 2 precisely. Questions are always been said when it comes to this topic. Very essential. And this is what we have. So lay us on this question.

33:30 Thank you for watching. See you in the next class. I have Mr Kenny once again. Bye.