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Economics 101: Fixed Costs | SterlingTerrell.net

Economics 101: Fixed Costs


What are fixed costs?

Fixed Costs are costs that do not change with varying levels of output.

For example:

Say you own a boutique store selling socks.

There are a number of expenses you have that are not  dependent on the number of socks you sell.

Rent is due no matter what. Utilities must be paid. The insurance premium is still due. And whatever employees you have at the time are still entitled to a paycheck.

The expenses you have that are dependent on the number of socks you sell are variable costs.