Revenue Flashcards
What are the 4 types of revenue?
Revenue
Average revenue
Marginal revenue
Total revenue
What is revenue?
Revenue is the income generated from the sale from goods and services.
How to calculate average revenue?
Total revenue / output
How to calculate marginal revenue?
The change in in revenue from selling one extra unit of output.
How to calculate total revenue?
Price x Quantity
When is revenue being maximised?
When marginal revenue = 0 i.e. no more added revenue can be achieved from producing and selling an extra unit of output.
What happens when marginal revenue becomes smaller and MR is positive with relatively elastic PED?
A fall in price is proportionally smaller than the increase in quantity demanded.
What happens when marginal revenue becomes smaller and MR is negative with relatively inelastic PED?
A fall in price is proportionally larger than the increase in quantity demanded.
What is a price taker?
They have no pricing power and have to accept the prevailing market price and do as well as they can.
What are some characteristics of price takers?
Normally operate in perfectly competitive markets
Will have a low percentage market share
Their TR curve will simply be an upwards line
What is a price maker?
Price maker have the ability/power to their own prices.
What are the characteristics of price makers?
Happens in all imperfectly competitive markets
The demand curve is downward sloping
Marginal revenue will lie below AR
