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Revenue concept

it is a presentation on revenue concept

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Revenue concept

  1. 1. General concept of total revenue, average revenue and marginal revenue. Derivation of TR, AR and MR under perfect competitive and monopoly market structure. Relationship between TR, AR and MR.
  2. 2. A. Total Revenue (TR): Formula:
  3. 3. B. Average Revenue (AR): Formula:
  4. 4. C. Marginal Revenue (MR): Formula:
  5. 5. ILLUSTRATION QTY 1 2 3 4 5 6 7 8 PRICE 12 11 10 9 8 7 6 5 Output Price TR AR MR 1 12 12 12 - 2 11 22 11 10 3 10 30 3 8 4 9 36 9 6 5 8 40 8 4 6 7 42 7 2 7 6 42 6 0 8 5 40 5 -2 SOLUTION
  6. 6. Total Revenue Under Perfect Competition Units of Output (Q) Per Unit Price (P) Total Revenue (TR) 0 10 0 1 10 10 2 10 20 3 10 30 4 10 40 5 10 50
  7. 7. TR OutputO 64 5321 40 TR 20 30 50 10
  8. 8. AVERAGE REVENUE UNDER PERFECT COMPETITION Units of Output (Q) Per Unit Price (P) Total Revenue (TR) Average Revenue (AR) = TR/Q 0 10 0 - 1 10 10 10 2 10 20 10 3 10 30 10 4 10 40 10 5 10 50 10
  9. 9. • Graphically, AR OutputO 64 5321 40 20 30 50 10 AR
  10. 10. Units of Output (Q) Per Unit Price (P) Total Revenue (TR) = P × Q Average Revenue (AR) = TR/Q Marginal Revenue (MR) = ΔTR/ΔQ 0 10 0 - - 1 10 10 10 10 2 10 20 10 10 3 10 30 10 10 4 10 40 10 10 5 10 50 10 10 Marginal Revenue in Perfect Competition
  11. 11. MR OutputO 64 5321 40 20 30 50 10 MR Graphically,
  12. 12. Monopoly Market
  13. 13. AR, TR & MR Under Monopoly
  14. 14. RELATIONSHIP BETWEEN AR AND MR CURVES & PRICE ELASTICITY
  15. 15. Quantity Q AR =AR curve MR curve
  16. 16. What we covered
  17. 17. Conclusion !
  18. 18. THANK YOU !

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