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Revenue Concepts in Economics Explained

The document discusses the concept of revenue in economics, detailing its types: Total Revenue, Average Revenue, and Marginal Revenue. It explains their relationships, particularly how they behave when price changes with output and when price remains constant. The document also includes examples and graphical representations of these relationships.

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19 views5 pages

Revenue Concepts in Economics Explained

The document discusses the concept of revenue in economics, detailing its types: Total Revenue, Average Revenue, and Marginal Revenue. It explains their relationships, particularly how they behave when price changes with output and when price remains constant. The document also includes examples and graphical representations of these relationships.

Uploaded by

edieraychchu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

COMPETENT COMMERCE

CLASSES
By:-Rohit Maheshwari

CLASS-XI
SESSION-2024-25

ECONOMICS
By-Anubhav Awasthi
________________________________________

TOPIC- 8
CONCEPT
OF
REVENUE
Student Name :-________________________
School:-______________________________
Revenue- refers to the amount received by a firm from the sale of a given
quantity of a commodity in the market

#Types of Revenue

1-Total Revenue: It refers to total receipts from the sale of a given quantity of a
commodity.

TR= Price x Quantity


2-Average Revenue:- It refers to revenue per unit of output sold.

AR=TR/Q
Note-AR-PRICE
3-Marginal Revenue :- It is the additional revenue generated from the sale of an
additional unit of output.

MR,=TR-TR

#Relationship between Revenue Concepts (In case of Price falls with rise in
output)

Units Sold Price TR AR MR


1 10 10 10 10
2 9 18 9 8
3 8 24 8 6
4 7 28 7 4
5 6 30 6 2
6 5 30 5 0
7 4 28 4 -2

(A) Relationship between AR & MR:-


1-Both AR & MR fall with increase in output
2- Falling rate of MR is twice then that of AR
3-As a result MR Curve is steeper than AR carve because MR is limited to
4-AR is derived by all the units.
A B
(B) Relationship between TR & MR:-

1-As long as MR is positive, TR increases.


2-When MR is [Link] reaches its maximum point.
3. When MR becomes negative, TR starts falling.

#Relationship between Revenue Concepts (In case of Price remains


constant)

Units Sold Price TR AR MR


1 5 5 5 5
2 5 10 5 5
3 5 15 5 5
4 5 20 5 5
5 5 25 5 5

(A) Relationship between AR & MR:-

1-Under perfect competition AR remains same at all levels of output and it is


equal to MR.
2-As a result both are horizontal straight line parallel to X-axis.
3-So the demand curve(or AR Curve) is perfectly elastic
(B) Relationship between TR & MR:-

1-Since MR is constant , TR also increases at a constant rate.


2-TR & MR are zero at zero level of output.
3-As a result , TR will be the positively sloped straight line and MR is a
horizontal straight line parallel to X- axis.

THANK YOU

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