Theory of Cost and Revenue

Grade 11 · Economics

Semester 2 | Period 5 | Week 28

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Subject: Economics

Semester: 2

Period: 5

Week: 28

School Name:

Teacher’s Name:

Subject: Economics

Grade Level: Grade 11

Week & Period: Week 28, Period V

Date:

Topic: Theory of Cost and Revenue
Sub-topic: Derivation of Cost and Revenue Curves

Instructional Objectives

By the end of the lesson, learners should be able to:

  1. Plot cost and revenue curves from tables.
  2. Identify the shapes and features of typical cost and revenue curves.
  3. Interpret the economic meaning of the various curves (e.g., U-shape, straight line).

 

Instructional Materials

  • Graph paper
  • Ruler and pencil
  • Marker and whiteboard
  • Chart of sample completed curves
  • Previously completed cost and revenue tables from Week 27

 

Previous Knowledge

Learners have already constructed cost and revenue tables and calculated values such as total cost, average cost, marginal cost, total revenue, and marginal revenue.

 

A – Anticipation (Engagement/Warm-Up)

Motivational Set (5 minutes)
Ask:

“Last week, we used tables to calculate different types of costs and revenues. If I give you a graph, can you tell me how your costs behave as output increases?”

Display a blank graph on the board. Guide students to recall how some costs (e.g., marginal cost) initially fall, then rise. Use this prompt:

“Today, we’ll turn those numbers into curves and learn what they tell us about business decisions.”

 

B – Building Knowledge (Development)

Teacher’s Explanation (20 minutes)

  1. Plotting Cost Curves
  • Fixed Cost (FC): A horizontal line—remains constant regardless of output.
  • Variable Cost (VC): Increases as output increases—usually a rising curve.
  • Total Cost (TC): Starts from the fixed cost level and slopes upward.
  • Average Cost (AC): U-shaped curve; it first falls, then rises.
  • Marginal Cost (MC): Also U-shaped; it reflects the law of diminishing returns.

Guide students to plot these values on graph paper using the Week 27 cost table.

  1. Plotting Revenue Curves
  • Total Revenue (TR): In perfect competition, this is a straight upward-sloping line (if price is constant).
  • Average Revenue (AR) and Marginal Revenue (MR): Horizontal straight lines (equal to price) in perfect competition.

Explain that in real-world imperfect markets, revenue curves may slope downward as price falls with more output.

 

  1. Interpreting Curves

Ask questions to build critical thinking:

  • Why is average cost U-shaped? (Due to increasing and diminishing returns)
  • What does it mean when marginal cost intersects average cost at its lowest point?

Show examples of complete cost and revenue curves using visual charts.

 

Class Activity (10 minutes)

In pairs, learners use previously completed tables to:

  • Plot TR and TC curves on the same graph
  • Identify profit region (where TR > TC) and loss region (where TC > TR)
  • Sketch and label MC and AC curves, noting their intersections

Teacher walks around to guide and correct common graphing mistakes.

 

C – Consolidation (Wrap-Up and Evaluation)

Teacher Summary (3 minutes)

  • Curves help visualize how cost and revenue behave as output changes.
  • MC and AC are both U-shaped due to the law of diminishing returns.
  • Revenue curves help determine the profit-maximizing output level.

 

Assessment (7 minutes)

  1. Multiple Choice Questions
  2. What is the shape of the average cost curve?
    Straight line
    B. Horizontal line
    C. U-shape
    D. Downward-sloping line
  3. In a perfectly competitive market, the marginal revenue curve is:
    U-shaped
    B. Horizontal
    C. Vertical
    D. Diagonal
  4. The marginal cost curve cuts the average cost curve at:
    The starting point
    B. The lowest point of AC
    C. The highest point of AC
    D. The point of maximum output

 

  1. Short-Answer Questions
  2. Why do we say the average cost curve is U-shaped?
  3. Draw a simple total cost and total revenue curve on the same graph and indicate the profit zone.
  4. List and describe any two features of the marginal cost curve.

Assignment

Using the following data, plot the total cost and total revenue curves on the same graph.

  • Fixed Cost: $50
  • Variable Cost per unit: $30
  • Price per unit: $100
  • Output levels: 0 to 5 units
  1. Prepare a cost and revenue table.
    ii. Plot TR and TC curves on a graph.
    iii. Identify break-even point and profit zone.

 

Teacher’s Reflection (Questions Only)

  1. Were learners able to correctly plot all required curves using their tables?
  2. Did students understand the economic meaning behind the shape of each curve?
  3. Were learners able to differentiate between total cost and total revenue curves on the same graph?
  4. Did students face difficulty identifying profit and loss regions from the graph?
  5. Were there any repeated graphing errors that need to be addressed in future lessons?
  6. Did the class show confidence in using graphical tools like rulers and axes labels appropriately?
  7. Were learners able to apply mathematical formulas accurately while plotting?
  8. Did time permit all learners to complete their graphs and explain them?