Average Costs
Unit 2 
Introduction  Review of Fixed, Variable and SemiVariable Costs  Total Costs  Average Costs  Economies of Sale  Costs of ODL versus Conventional Education  Questions for Consideration 
The exercise in the previous section highlights the importance of average costs in the economics of ODL.
Average costs are simply the total costs of a course divided by the total number of students. 
It is important to calculate average costs over the lifetime of a course rather than on a yearbyyear basis. This is because some costs, such as those for developing materials, are only incurred once even though the course may run for a number of years without revision. The total costs over the economic life of the course need to be divided by the total number of students expected to enrol for the course during the same period.
The Average Costs equation is as follows:
 AC_{s} = TC/TN_{s}
Where:
 AC_{s} = average cost per student
 TC = total costs
 TN_{s} = total number of students
The average cost per student behaves in a different way from the total cost of a course. Whereas the total cost of a course continues to rise as student numbers increase, the average cost per student actually falls. This is because the fixed costs of the course can be spread amongst a greater number of students, even though the variable cost per student remains unchanged.
Exercise 2.2

Self Assessment

When Student Numbers Grow  When Student Numbers Decline  
Fixed Costs  In Total  
Average (per Student)  
Variable Costs  In Total  
Average (per Student) 
Source: Adapted from Rumble, 1997, Figure 5.2, page 37.
You can check your work by clicking on Answers to Self Test.