Practical Finance for Software Engineering | Part 1: Understanding Variable Costs and Fixed Costs

Introduction

Part 1: Understanding Variable Costs and Fixed Costs

We don’t make any profits, so we make up for it in volume.

Fig. 1: f, v(n), and r(n).
Fig. 2: Same as above, but with somewhat naïve economies of scale taken into account. In some cases, The Law of Diminishing Marginal Returns can become relevant e.g. when you hit infrastructural bottlenecks and need to start investing in something like multi-region sharding.

Bonus: Thinking on the Margins

Fig. 3: Marginal Cost, Marginal Revenue, and Price.

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