uplearn revenue Flashcards
p = £5 q = 6
p = £6 q = 5
both TR = £30
MR = 0
How come their total revenue has stayed the same even though more is being sold?
Because although they are selling more quantity, they are selling for a lower price. So the increase in quantity is cancelled out by the decrease in price, so total revenue stays the same.
what happens when marginal revenue is positive?
total revenue increases with quantity
what happens when marginal revenue is 0?
total revenue doesn’t change
average revenue in two ways?
TR/output
AR = price
what happened to MR as price decreases and quantity increases?
MR decreases from positive to negative
what is the relationship between MR and TR?
When MR is positive, TR will increase as quantity increases.
When MR is negative, TR will decrease as quantity increases.
what is the link between PED and MR?
MR = positive, demand is elastic.
MR = 0, demand is unitary.
MR = negative, demand is inelastic.
why does demand become more elastic as quantity decreases?
quantity decreases
we move towards the upper half of the demand curve
where demand is elastic here
a reduction in quantity will increase the price
higher prices will have more of an impactful response from demand
when do we revenue maximise?
MR = 0
TR is maximised and demand is unitary
