Total Fixed Cost (TFC):- The total amount of money spends on fixed factors of production is called fixed cost.
It can be obtained by subtracting, total variable cost from total cost
TFC = TC - TVC
Total Variable Cost (TVC):- The total amount of money spends on variable factors of production is called total variable cost.
It can be obtained by subtracting, total fixed cost from total cost
TVC = TC - TFC
Total (TC):- The total amount of money spends on all the factors (fixed and variable) of production is called total cost.
It can be obtained by summing up, total fixed cost and total variable cost
TC = TFC + TVC
The relationship among TC, TFC and TVC is as under-
When output is zero, variable costs are also zero but even then fixed costs are still incurred. Thus at a zero level of output total fixed cost and total variable costs are equal.
As output increases total fixed costs remain constant but total costs and total variable costs goes on increasing.
An increase in TC indicates an increase in TVC only as TFC remain same. Thus the difference between TC and TVC is equal to TFC.
