Indifference curve

An indifference curve is a line that shows combinations of goods among which a consumer is indifferent. The indifference curve tells us that some one is just as happy to consume the combination of at a point of any other point along the curve.
In the next figure we can see that, we measure units of clothing on one axis and units of food on the other. Each of our four combinations of goods is represented by its points, A, B, C, D. but these four are by

No means the only combinations among which we are indifference. Another batch, such as 1 unit of good and 4 unit of clothing might be ranked as equal to 4 unit of food and 1 unit of clothing and B or C. the curved contour of figure linking up the four points, is an indifference curve. The points on the curve represent consumption bundles among which the consumer in indifferent all are equally desirable. When a consumer has fixed money income all of which she spends is conformed to market price of two goods, she is constrained to move along a straight line called the budget line or budget constraint. The consumer will move along this budget line until reaching the highest attainable indifference curve. At this point the budget line will touch, but not cross an indifference curve, Hence equilibrium is at the point of tangency, where the slope of the budget line exactly equals the slope of the indifference curve.
The indifference curve is just one of a whole family of such curves. The curves labeled  are three other indifference curves. We refer to  as being as a higher then . By a person preference, we can draw conclusions about the shape of indifference curve.

Diminishing return

The law of diminishing returns holds that we will get less and less extra output when we add additional doses of an input while holding other input fixed. In other words, the marginal product of each unit of input will decline as the amount of that input increase, holding all other inputs constant.
The law of diminishing returns expresses a very basic relationship. As more of an input such labor is added to a fixed amount of land, machinery & other inputs the labor has less & less of the other factors to work with the land gets more crowded, the machineries overloaded and the marginal product of labor declines.
The law of diminishing returns can be shushed out of the putting ourselves in the boots of a farmer performing an agricultural experiment illustrated by table. Given a fixed amount of land and other inputs assume that we use no labor inputs at all with zero labor input there is no corn output. Now add 1 unit of labor to the same fixed amount of land 2000 bushels of corn is produced. The second unit of labor adds only 1000 bushels of additional output, which is less than what the first unit of labor added.

Fixed cost, variable cost & total cost

Fixed cost: Fixed cost represents the total expense that is paid out even when no output is produced. Fixed cost is unaffected by any variation in the quantity of output. Total fixed cost does not change as output change.
Total variable cost: variable cost represents expenses that very with the level of output such as raw materials, wages and fuel and included all cost that is not fixed always by definition. It is cost of the firms variable inputs. Because to changes its output a firm must change the quantity of variable inputs total variable cost changes as output changes.
Total cost: Total cost is the combination of fixed & variable cost. It represents the lowest total expense needed to produce each level of output.
TC = FC +VC
Average cost is the total cost divided by the total number of units produced.
   
1.    Average fixed cost
2.    Average variable cost
3.    Average total cost.
Average fixed cost: Average fixed cost is total fixed cost per unit of output.
Average variable cost: Average variable cost total cost per unit of output.
Average total cost: Average total cost is total cost per unit of output.
            ATC = AFC + AVC