Average fixed cost

Fixed cost incurred towards single unit of output out of total output or production is called as average fixed cost.

Average Fixed Cost is always calculated on the output of goods and services according to the economics and Average Fixed Cost always decreases when there is raise in output and if the output is decreased average fixed will always goes up.

Total fixed cost (ex:- Rent) TFC = 1000/-

No. of units produced TQ = 1000

The more he produces, per unit cost will be decreased {per unit cost of fixed cost is average fixed cost}

Average Fixed Cost Schedule Table

If you observe the average fixed cost schedule table, one can easily understand concept of average fixed cost and what is average fixed cost in the economics. When there are zero units produced, average fixed cost is nil and does not exist, as average fixed cost cannot be calculated when there is no production. When the production is started with 1000 units, average fixed cost incurred is 1.00/- per unit and when the production is raised to 3000 units, the average fixed cost came down to 0.33/- per unit, as the average fixed cost always come down when there the production is raised due to effect of economies of scale of production. likewise the average fixed cost is 0.20/- per unit at the 5000 units of production.

Average Fixed Cost Graph

The above average Fixed Cost Schedule is presented below in graphical form so as as to understand easily about this concept. The Average Fixed Cost always is slopping downwards when there is increase in the output, dissimilarly the Average Fixed Cost Schedule curve climbs up when there is decrease in the output. Hence Average Fixed Cost is inversely related to output which says that more output is always beneficial for producer to bring down the fixed cost.