3.3.1 Revenue Flashcards
1
Q
What is Total revenue?
A
The total amount of money a firm earns from selling a certain quantity of goods or services at a given price
2
Q
How is Total revenue calculated?
A
TR = Price (P) x Quantity sold (Q)
3
Q
What is Average revenue?
A
The revenue generated by each individual unit sold
4
Q
How is Average revenue calculated?
A
AR = TR / Q
5
Q
What is Marginal revenue?
A
The additional revenue generated by selling one more unit of a product
6
Q
How is Marginal revenue calculated?
A
MR = ΔTR / ΔQ
7
Q
What happens to TR when demand is elastic?
A
- if a firm lowers its price, TR increases
- if a firm increases its price, TR decreases
8
Q
What happens to TR when demand is unitary elastic?
A
- no effect
9
Q
What happens to TR when demand is inelastic?
A
- if price decreases, TR will decrease
- if price increases, TR will increase
