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Subject: Economics
Semester: 2
Period: 5
Week: 25
School Name:
Teacher’s Name:
Subject: Economics
Grade Level: Grade 11
Week & Period: Week 25, Period V
Date:
Topic: Theory of Cost and Revenue
Sub-topic: Definitions of Cost and Revenue
Instructional Objectives
By the end of the lesson, learners should be able to:
- Define cost of production and revenue.
- Explain the economist’s and accountant’s views of cost.
- Differentiate between explicit and implicit costs with relevant examples.
Instructional Materials
- Chart showing cost classifications
- Sample business data
- Flashcards with cost and revenue terms
- Marker and board
- Printed business case scenarios
Previous Knowledge
Learners have already been introduced to the concept of production and are familiar with how businesses function and incur various expenses.
A – Anticipation (Engagement/Warm-Up)
Motivational Set (5 minutes)
Begin by asking students:
“If you started a small restaurant and hired a cook, paid rent, and used your father’s car for delivery without paying him—what would you call all these costs?”
Allow different responses and write them on the board. Guide students to understand that some costs are paid in cash (explicit), while others involve using personal resources without payment (implicit).
Introduce the lesson:
“Today we will learn how to identify all types of costs a business faces—including the hidden ones—and how income (revenue) is calculated.”
B – Building Knowledge (Development)
Teacher’s Explanation (20 minutes)
- Meaning of Cost of Production
Cost of production includes all expenses made by a business in the course of producing goods and services. These include:
- Wages
- Rent
- Raw materials
- Utility bills
- Machine maintenance and depreciation
- Meaning of Revenue
Revenue is the total income earned from selling goods or services.
Formula: Revenue = Price × Quantity Sold
Example: If a business sells 80 units of a product at $5 each, the revenue is 80 × 5 = $400.
- Economist’s vs. Accountant’s View of Cost
- Accountant’s View: Focuses on explicit costs—expenses that are recorded and paid for directly.
- Economist’s View: Includes both explicit and implicit costs—which are the value of self-owned resources used without payment.
- Explicit vs. Implicit Costs
Explicit Costs
- Wages paid to workers
- Rent for shop
- Payment for electricity
Implicit Costs
- Using one’s own building for business without paying rent
- Owner working full-time without a salary
- Using personal laptop for company operations
Class Activity (10 minutes)
Learners are grouped in pairs and given a small business scenario (e.g., tailoring, poultry farming, POS business). Each pair:
- Lists 3 explicit costs
- Lists 2 implicit costs
Each pair shares their list with the class. Teacher corrects misconceptions and affirms valid responses.
C – Consolidation (Wrap-Up and Evaluation)
Teacher Summary (3 minutes)
- Cost refers to what a business spends to produce goods or services.
- Revenue is the income earned from those goods/services.
- Economists consider all costs (explicit + implicit), while accountants only focus on what is paid directly.
Assessment (7 minutes)
- Multiple Choice (Circle the correct option A–D):
- Which of the following is an implicit cost?
Salary paid to cashier
B. Rent paid for the office
C. Using personal tools in a business
D. Electricity bill - Revenue is best defined as:
Total cost + profit
B. Income from donations
C. Income from sales
D. Tax deducted from income - An economist’s cost of production includes:
Only cash expenses
B. Interest on loans only
C. Both paid and unpaid resource use
D. Payments to suppliers only
- Short-Answer Section:
- Define revenue and provide its formula.
- List three examples of explicit costs in a tailoring business.
- Differentiate between the accountant’s and the economist’s view of cost with examples.
Assignment
Write a short paragraph explaining why a business owner should care about implicit costs, even though they are not recorded in the financial records. Provide one real-life example.
Teacher’s Reflection
- Were learners actively engaged during the lesson?
- Did learners show understanding of the objectives?
- What were students' reactions to the activity?
- Were any misconceptions observed?
- What improvements will be made in the next lesson?