Reveneu😏

Question 1

Formula for TR

Answer 1

Price x quantity

Question 2

TR

Answer 2

How much a firm recieves from revenue in total.

Question 3

AR

Answer 3

What a business recieves on average from each sale.

Question 4

AR formula

Answer 4

TR/Q … But also AR = P.
This is because if you replace TR by the PxQ (TR formula) The Q at the top and the bottom cancel each other out and you are left with P.

Question 5

How do you get AR from a graph?

Answer 5

It is the price of each good at the quantity being sold.

Question 6

What is the demand curve also equal to?

Answer 6

D= AR= P.
When drawing the demand curve make sure that the demand curve is TOUCHING the y axis at the top.

Question 7

Meaning of Marginal Revenue?

Answer 7

Marginal : additional
Revenue: How much a firm makes for selling a good.
Marginal revenue: additional revenue a firm makes from selling ONE extra unit of a good.

Question 8

Explain what happens when Quantity increases, the effects on Price and TR?

Answer 8

Q increases P decreases because in order to get people to buy more, the price needs to decrease.
This means that Q is bigger and P is smaller , usually the TR increases.

Question 9

What happens to MR as the TR plateus?

Answer 9

MR decreases by each unit because the TR will decrease more and more and that’s because the price continues to go down and the quantity increases (PxQ) = TR it gets smaller.

Question 10

What happens to TR as the Quantity increased?

Answer 10

TR increased and then decreased.

Question 11

When marginal revenue is positive, what happens to TR?

Answer 11

TR increases with quantity

Question 12

When MR is 0 , what happens to TR?

Answer 12

TR doesn’t change

Question 13

When MR is negative , what happens to TR?

Answer 13

TR decreases with quantity.

Question 14

What happens to AR when the TR is 0?

Answer 14

AR is ALWAYS equal to price , therefore if the price of the good is £10, then the AR=P so AR=£10.
Even if the TR is zero.

Question 15

How do you know MR when TR increases by more than ONE extra unit?

Answer 15

Use the MR formula. = Change in TR/ Change in Q

Question 16

What is the MR formula?

Answer 16

MR = Change in TR (New TR - Old Tr) / Change in Q( New Q - Old Q).

Question 17

What happens when there is an increase in price ?

Answer 17

Reduces TR overall , because the Qd falls overall.

Question 18

Explain the relationship between the fall in price and TR.

Answer 18

Fall in price will mean that Qd will increase, meaning there’s an overall increase in TR.

Question 19

When demand is elastic an increase in price will….

Answer 19

Decrease total Revenue.

Question 20

With elastic demand, when price decreases…

Answer 20

Total revenue increases.

Question 21

When demand is inelastic , what happens to TR when price increases?

Answer 21

It increases the TR.

Question 22

What happens when demand is inelastic and there’s a decrease in price?

Answer 22

Decrease in TR, because the price falls and the Qd rises by a smaller percentage.