Question

Try to collect details of various household expenses which you or your family is incurring per month. Try and divide such expenses under

a) Economic and Accounting costs

b) Short Run cost - Fixed costs and Variable Costs

c) Long Run Costs

d) Where would you fit HealthCare/College Costs for you/your family? What would be the short run and long run impact?

Answer 1

a) Economic cost = Explicit cost + Opportunity cost

Accounting cost = Explicit cost

The time when I am busy shopping consumption goods for households and not being to study is an opportunity cost. Explicit cost is the cost I pay to buy household goods.

Economic cost will always be more than accounting cost.

b) Short run Fixed cost includes: Grocery, Fruits / vegetable cost

Short run Variable cost includes: Repair of house, electricity/phone bills, maintenance of vehicles and fuel used by them etc.

c) Long run cost include retirements plans, insurance plans, education and marriage of children.

d) College is short run variable cost as it will be of 3-4 years while health care cost will always be there and includes the insurance cost which is a long run cost.