It should be noted that simplification of government via the Internet might be delivered across channels other than Web browsers. 2 To be fair to the economist, labor is not a purely variable cost. For the purpose of analyzing electronic government, however, we assume that workers can be added or removed from certain government processes and reallocated as necessary to other parts of the organization. The first type of cost is termed a fixed cost, and is defined as the up-front expenditures that a business makes irrespective of the volume of goods or services that the business produces. Examples of fixed costs include land, equipment, buildings and advertising.
Variable costs are costs that can be allocated to a specific unit of production.
In the automotive industry, a variable cost would include the bolts that attach various parts or the paint that is applied to the exterior of the car's body. The total amount of variable costs that businesses or governments face corresponds directly with the total output they generate. In the tax payment-processing world, variable cost includes the hourly labor needed to process payments, answer questions, and maintain records of citizen transactions. In the IT environment, variable costs include transaction payment-processing costs, telecommunication costs and other costs that vary directly with total output.