Chapter 4 – example 6 (b)

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March 26, 2012 at 6:47 am #51941
yan03ky
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queation is : Descibe the relationship between the output & costs in the form of a linear equation. what is mean? please help!!!
March 26, 2012 at 9:57 am #95728
John Moffat
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A linear equation is one that graphs as a straight line and is always of the form:
y = a + bx (where a and b are constants).

For the relationship between costs and output, y will be the cost and x will be the output in units.

So, if the equation was (for example) y = 20 + 3x then for any value of x (output) you could calculate the cost (y).

The object of the exercise is to calculate what the values of a and b are.
March 26, 2012 at 2:52 pm #95729
yan03ky
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Thank you.
March 26, 2012 at 2:56 pm #95730
yan03ky
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another question is chapter 4 – question 5, ask about graphs, I have no idea that how to answer and also don’t understand. Please kindly help why the answer is B!!!
March 27, 2012 at 5:59 am #95731
John Moffat
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Because the variable cost per unit is constant, the graph is linear.

The line suddenly drops because a lower price per unit applies.

The new line must go through the origin because the lower price applies retrospectively.
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