Revenue – MR, AR + TR Flashcards
1
Q
TR =
A
P X Q
2
Q
AR =
A
TR/Q = D
3
Q
MR =
A
change in TR/ change in Q
4
Q
Revenue curves depend on
A
the level of competition – perfect or imperfect?
5
Q
perfect competition
A
- Many buyers and sellers – infinite
- Homogenous goods – the same goods
- Firms are price takers – take market price only
- No barriers to entry and exit
- Perfect information
6
Q
imperfect competition
A
- Few buyers and sellers
- Differentiated goods
- Firms are price makers
- High barriers to entry/ exit
- Imperfect information
7
Q
Relation between elasticity of the curve, price and revenue
A
we can say that on the elastic part of the demand curve, if the firm lowers prices then total revenue increases and if it raises prices then total revenue falls. If we consider the inelastic part of the demand curve, if the firm lowers prices then it will witness a fall in revenue and if the firm raises prices then it will experience a rise in revenue.
