The Revenue Of A Firm Flashcards
Revenue is
The money firms receive from selling goods or services.
Total revenue
Total amount of money received in a time period from a firms sales
Average revenue
Is the revenue per unit sold
Marginal revenue
Is the extra revenue received as a result of selling the final unit of output
A firms demand curve determines how revenue relates to output
A firms total revenue is given by quantity x price.
A firm that’s a price taker
Has a perfectly elastic demand curve
A firm that is a price taker
Has to accept the price set by the market
If the firm increases its price then the quantity sold will drop to 0.
With a perfectly elastic demand curve
Marginal revenue = average revenue
Because each extra unit sold brings in the same revenue as all the others.
A firm that is a price maker
Has a downward sloping demand curve
With a downward sloping demand curve
Total revenue is maximised when PED=-1
With a downward sloping demand curve
Marginal revenue =0
When total revenue is at its maximum.
