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Re: Total Revenues Collected equation

Posted by Satya Gabriel on November 15, 2000 at 11:19:30:

In Reply to: Total Revenues Collected equation posted by Jenn Gangne on November 14, 2000 at 20:14:35:

: In Monday's class, Prof. Gabriel posted an equation on the board that related the total revenues collected to the total costs. While I think I understand this part of the equation (that by diminishing the total costs of production, one can increase the total revenues collected)

Profits = Total Revenues minus Total Costs

Reduce Costs with revenues constant and you increase profits (not revenues)

Total Costs = Wage Costs plus Material Input and Equipment Costs

If wage costs are reduced, all other things being equal, then Total Costs are reduced and Profits increased.

Wage costs are based on both the wage paid (in real terms, in the example in class) and the productivity of the workers. If workers produce more per hour of labor time hired, then total costs can be reduced, all other things being equal. Alternatively, real wages can fall. Or there can be a combination of falling real wages and increased productivity resulting in higher profits.

Lets talk about this in more detail in class, yes?


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