Microeco 2.1 Flashcards
Total revenue =
Total revenue = Price x Quantity
Define: Total revenue
The total amount a business receives from its sales
Define: Average revenue
What a business receives from the average sale
Average revenue =
AR = Price
= TR / Q
The average revenue curve is the same as…
The demand curve
Define: Marginal revenue
Additional revenue a firm makes selling one extra unit
When MR is negative, Total revenue __________
Decreases
Marginal revenue formula
Change in Total Revenue / Change in Quantity
MR is half the quantity of _____
Marginal Revenue is half the quantity of Total Revenue
Total revenue will increase as long as MR is ___________
Positive
If demand is elastic, an increase in price will _________ total revenue
Decrease
- Because although price has risen, quantity has fallen by a greater %
If demand is inelastic, an increase in price will ________ total revenue
Increase
- Because although quantity has risen, price will fall by a greater %
PED formula
PED = % change in price / % change in quantity
At higher prices, a % change in price has a ________ impact so consumers will respond _____ and demand will be __________
Higher prices - Greater impact
Consumers respond more
Demand inelastic
At lower prices, a % change in price has a _________ impact on consumers will respond ______ and demand will be __________
Lower prices - Smaller impact
Consumers respond less
Demand inelastic
