Revenue Flashcards
What is total revenue?
Total revenue is the money received by a firm from the sale of goods or services
What is the formula for TR?
TR = Q * P
What is average revenue?
Average revenue is the revenue per unit of output sold
What is the formula for average revenue?
AR = TR/Q
What is marginal revenue?
Marginal revenue is the additional revenue of selling an additional unit of output
What is the formula for marginal revenue?
MR = change in TR/change in Q
What type of elasticity do firms in perfect competition have?
perfectly elastic
What is the relationship between the demand curve, AR curve and MR curve in perfect competition?
D = AR = MR
What is the relationship between TR and MR in imperfect competition?
When TR is maximised, MR = 0
What is the relationship between the D curve and the AR curve in imperfect competition?
D = AR
What is the relationship between the MR curve and the AR curve in imperfect competition?
When the demand curve is linear, MR will always fall twice as steeply as the AR curve
What is the relationship between PED and the demand curve in imperfect competition?
At higher prices, PED is elastic.
At lower prices, PED is inelastic
What is the relationship between PED and MR?
When PED is elastic, MR is positive
When PED is inelastic, MR is negative
When MR = 0, PED is unitary elastic
What is the relationship between PED and TR?
When PED is elastic, TR is rising
When PED is inelastic, TR is falling
