Total , Average And Marginal Revenue Flashcards
Business revenue
Money flowing into a business over a given time period from selling goods and services in markets. Also known as a turnover.
How to calculate total revenue?
Price per unit x quantity (P x Q)
Or
Average revenue x output
How to calculate average revenue = price per unit
Total revenue / output
Average revenue curve is the same as the demand curve.
What is marginal revenue ?
The change in the total revenue from selling one extra unit of output in a market.
Calculate marginal revenue
Total rev(P x Q) / demand
When does a business maximise total revenue?
When the marginal revenue from the next unit of a good or service sold is zero(MR = zero)
What is the key for knowing whether a business is maximising revenue?
As longs as marginal revenue is positive , if you cut the price the total revenue will increase(go up)
But if you cut the price too low the marginal revenue remains the same which will then mean that the total marginal revenue will be zero hence the business will be maximising revenue.
If a firm is able to sell more quantity of output at the same price then
AR =MR
