Economic Concepts

The Basic Business Graph...

The Basic Business Graph

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Micro Economics 101. Yes, a course at every school.  Here it is condensed into a single graph. 

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Total Revenue ($) rises as units increase.  Total Cost starts above $0 because every business has both startup and fixed costs regardless of units sold.  At the point units rise enough so the Total Revenue line increases enough to meet Total Cost, you are at Break-Even. Selling units at a quantity greater than Break-Even means you are making profit.

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As units (and $) continue to rise further to the right the company makes more and more money.

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This applies to the steel mill (tons), the grocery store (items), and the law firm (hours).

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What is your break-even point?  What are your fixed costs before you even turn the lights on every morning?

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