Wouldn't plot of land potentially be a variable cost? Labor and materials is described as a variable cost due to "the cost changes based upon the size of the Arena". However, if we are to build an area 4 times as large, won't we need 4 times as much land? Also, wouldn't the taxes on a larger building project potentially be larger? Furthermore, wouldn't the insurance against delays and/or cost overruns as a result of delays of a large project be more than a smaller project? Might administrative costs be larger too for a larger arena if it requires a larger workforce to build? (assuming same time-scale) if the larger arena has proportionally larger time-frame then I guess the administrative costs might be fixed since same number of workers would be required. It feels like to me a better example of fixed costs might be like hooking up the arena plot of land to the power grid, or water grid. In theory, the cost to connect a building to the power grid might be equal whether it's double or triple the size.
In economics, land is usually referred as fixed cost, labor and material are variable cost depends on how you want to build something, how large, how grand and etc. For land, normally, we assume that you purchase it, whether you buy it for building something or not doing anything, the land certainly cost you the same. Or another example, rental fee of a shop, no matter you’re running business or not running a business on the shop, the rental fee agreed is maybe 1000 dollar, then you will need to pay 1000 dollar. Whether you run a business with huge profit or loss, you still need to pay your rental fee. The same concept apply to admin cost, it’s like once you start the project, these are cost you must pay no matter you make profit or loss. Let’s talk about labor and material? Why they are variable, because you can adjust. For example, you feel like you only need simple deco, then the cost of hiring people to do the deco may be cheaper. Or you want better deco, you’ll use more labor or expensive materials. But for that piece of land you purchased, when you purchase it, it doesn’t take into account of what you are going to build in the future, no matter you are going to resell it at higher price or build something for future business etc. Fixed Hope this explains your doubt
Wouldn't plot of land potentially be a variable cost? Labor and materials is described as a variable cost due to "the cost changes based upon the size of the Arena".
However, if we are to build an area 4 times as large, won't we need 4 times as much land? Also, wouldn't the taxes on a larger building project potentially be larger? Furthermore, wouldn't the insurance against delays and/or cost overruns as a result of delays of a large project be more than a smaller project? Might administrative costs be larger too for a larger arena if it requires a larger workforce to build? (assuming same time-scale) if the larger arena has proportionally larger time-frame then I guess the administrative costs might be fixed since same number of workers would be required.
It feels like to me a better example of fixed costs might be like hooking up the arena plot of land to the power grid, or water grid. In theory, the cost to connect a building to the power grid might be equal whether it's double or triple the size.
In economics, land is usually referred as fixed cost, labor and material are variable cost depends on how you want to build something, how large, how grand and etc. For land, normally, we assume that you purchase it, whether you buy it for building something or not doing anything, the land certainly cost you the same. Or another example, rental fee of a shop, no matter you’re running business or not running a business on the shop, the rental fee agreed is maybe 1000 dollar, then you will need to pay 1000 dollar. Whether you run a business with huge profit or loss, you still need to pay your rental fee. The same concept apply to admin cost, it’s like once you start the project, these are cost you must pay no matter you make profit or loss.
Let’s talk about labor and material? Why they are variable, because you can adjust. For example, you feel like you only need simple deco, then the cost of hiring people to do the deco may be cheaper. Or you want better deco, you’ll use more labor or expensive materials. But for that piece of land you purchased, when you purchase it, it doesn’t take into account of what you are going to build in the future, no matter you are going to resell it at higher price or build something for future business etc.
Fixed
Hope this explains your doubt
Thanks Sir
Thank you
what do you mean by UVA in 5:07 ?