Date : 28.5.2020
Let us begin with the next topic Revenue
Revenue refers to the amount recieved by a firm from the sale of a given quantity of a commodity in the market.
CONCEPT OF REVENUE: The concept of Revenue consists of 3 important terms
1. Total Revenue : Total Revenue refers to the Total reciepts from the sale of a given quantity of a commodity.
TR = Quantity X Price.
2. Average Revenue : Average Revenue refers to the revenue per unit of output sold.
AR = TR/QUANTITY
AR is also equal to the Price
3. Marginal Revenue : Marginal Revenue is the additional revenue generated from sale of an additional unit of output.
MR = TRn - TRn-1 Or MR= Change in TR/ Change in number of units
TR is the summation of MR
The concept of TR, AR and MR can be better understood from the table given below
Relationship between Revenue Concepts: It can be discussed under two situations
1. When Price remains constant: It means, any quantity of a commodity can be sold at a particular Price.
2. When Price Falls with rise in Output : Sales can be increased only by lowering the Price.
Relationship between AR and MR when Price is constant: Always remember that when a firm is able to sell more output at the same price, then AR =MR at all levels of output.
Relationship between TR and MR when Price is constant: MR and AR curves are horizontal straight lines parallel to X axis . Since MR remains constant, TR also increasesat a constant rate.Due to this reason , the TR curve is positively sloped straight line. As TR is zero at zero level of output , the TR curve starts from the origin.
Relationhsip between AR and MR ( When Price falls with rise in output) : When firms can increase their volume of sales only by decreasing the price, then AR falls with increase in sales.It means , revenue from every additional unit (MR) will be less than AR. As aresult both AR and MR curve slopes downwards from left to right.
The relationship can be better understood through the schedule and graph.
General relationship between AR and MR
1. AR increases as long as MR is higher than AR
2. AR is maximum and constant when MR is equal to AR
3. AR falls when MR is less than AR
Please go through the video links to understand the chapter better
https://www.youtube.com/watch?v=LJx7HW6E-8s
https://www.youtube.com/watch?v=VgtDXepSz7E
Let us begin with the next topic Revenue
Revenue refers to the amount recieved by a firm from the sale of a given quantity of a commodity in the market.
CONCEPT OF REVENUE: The concept of Revenue consists of 3 important terms
1. Total Revenue : Total Revenue refers to the Total reciepts from the sale of a given quantity of a commodity.
TR = Quantity X Price.
2. Average Revenue : Average Revenue refers to the revenue per unit of output sold.
AR = TR/QUANTITY
AR is also equal to the Price
3. Marginal Revenue : Marginal Revenue is the additional revenue generated from sale of an additional unit of output.
MR = TRn - TRn-1 Or MR= Change in TR/ Change in number of units
TR is the summation of MR
The concept of TR, AR and MR can be better understood from the table given below
Relationship between Revenue Concepts: It can be discussed under two situations
1. When Price remains constant: It means, any quantity of a commodity can be sold at a particular Price.
2. When Price Falls with rise in Output : Sales can be increased only by lowering the Price.
Relationship between AR and MR when Price is constant: Always remember that when a firm is able to sell more output at the same price, then AR =MR at all levels of output.
Relationship between TR and MR when Price is constant: MR and AR curves are horizontal straight lines parallel to X axis . Since MR remains constant, TR also increasesat a constant rate.Due to this reason , the TR curve is positively sloped straight line. As TR is zero at zero level of output , the TR curve starts from the origin.
Relationhsip between AR and MR ( When Price falls with rise in output) : When firms can increase their volume of sales only by decreasing the price, then AR falls with increase in sales.It means , revenue from every additional unit (MR) will be less than AR. As aresult both AR and MR curve slopes downwards from left to right.
The relationship can be better understood through the schedule and graph.
General relationship between AR and MR
1. AR increases as long as MR is higher than AR
2. AR is maximum and constant when MR is equal to AR
3. AR falls when MR is less than AR
Please go through the video links to understand the chapter better
https://www.youtube.com/watch?v=LJx7HW6E-8s
https://www.youtube.com/watch?v=VgtDXepSz7E
GOOD EVENING SIR KEVIN SUNIL PAPPAN 11B
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