Break-even Analysis Form
BREAK-EVEN ANALYSIS - 3
Figure 1. A break-even diagram with
constant price and constant unit cost.
II. BREAK-EVEN DIAGRAM
Figure 1 is a typical
break-even diagram
(also known as break-even chart). The total revenue
and total cost curves are straight lines because price and AVC are assumed to be constant.
The break-even diagram can be employed to see the effects of various exogenous changes on
the break-even point. Here are a few scenarios:
TABLE 2.
Initial change Which curve is affected What happens
to Q
BE
Increase in output price TR curve,
counterclockwise
Decrease
Increase in the price of a
variable input
TVC and TC curves,
both counterclockwise
Increase
Higher TFC TFC curve,
parallel-shift up
Increase
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