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Economics 101: Variable Costs | SterlingTerrell.net

Economics 101: Variable Costs

 

What are variable costs?

Variable Costs are costs that change with varying levels of output.

For example:

Say you own a boutique store selling suits.

Your cost of inventory is a variable cost because if you sell more suits, you will buy more suits to sell again. Commissions to salespeople will also vary with sales. YOu can also include transaction fees and shipping charges.

The expenses you have that are not dependent on the number of suits you sell are fixed costs.