What do you understand by the term least-cost solution and in what sense is it a "solution"?

The term least-cost solution does non describe one particular proposition principle in economics. Least-cost solution covers a wide diversity of economical topics that help form an ultimate solution.

The term bay window be introduced in the context of a tightens aim and objectives e.g. clams maximisation. In many cases firms may have opposite objectives much(prenominal) as providing quality to customers and thus may marry techniques such as total quality management (TQM). Organizations such as Banks often prefer to focus on providing efficacious services. Occasionally firms abide by aims and objectives other than profit maximization to encourage and enhanced operational techniques and image.

Ultimately most firms override aims to abbreviate on maximizing profits. At this point a firm will operate accordingly to reduce costs and maximise return in show to acquire full fiscal benefit from the output. When a firm adopts such an aim it is categorized as the usual theory of supply, hence is also cognize as theory of the firm.

A firm calculates its profits by subtracting the total costs of production from the total revenue beard from the gross sales of that produced amount.



(See Figure 1)

Figure 1

¨ = TR - TC

Profit = Total Revenue ¡V Total Costs

Total Income from sales Variable Costs + Fixed Costs

Firms must first detach un needful costs and increase sales performance to generate maximum profit. The firm should minimize costs that do not have a direct influence on sales and output.

A firms inputs and their expenditure (Factors of Production) have a strong influence on the cost of a firms output. If a firm increases its production overdue to a rapid increase in demand, there may be a delay in acquiring the necessary inputs/resources. For example a firm can employ to a greater extent labour to manufacture more produce. However due to a limiting factor...

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