Economics students find 4 easy steps to construct economics diagrams

1. HOW TO DRAW
MARKET STRUCTURE
DIAGRAMS
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4 Easy steps to drawing effective
market structure diagrams

2. PEREFCT
COMPETITION
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3. STEP 1
DRAW THE
Cost/Revenue
DEMAND
CURVE
P
D = MR = AR
Output/Sales

4. STEP 2
MC MC
WHEN AC IS WHEN AC IS
Cost/Revenue
Cost/Revenue
ABOVE THE AR BELOW THE AR
CURVE IT IS A CURVE IT IS A
LOSS AC LOSS
AC
P D = MR = AR P D = MR = AR
Output/Sales Output/Sales
PLACE THE AC & MC CURVE

5. STEP 3
MC MC
Cost/Revenue
Cost/Revenue
AC
AC
P D = MR = AR P D = MR = AR
Q Q
Output/Sales Output/Sales
IDENTIFY THE PROFIT MAXIMISATION LEVEL OF
OUTPUT

6. STEP 4
MC MC
Cost/Revenue
Cost/Revenue
AC
AC
P LOSS D = MR = AR P D = MR = AR
Abnormal Profit
Q Q
Output/Sales Output/Sales
SHADE THE REGION BETWEEN AC CURVE AR CURVE
TO SHOW THE LOSS OR PROFIT

7. MONPOLY
AND
MONOPOLISTIC
COMPETITION
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8. Cost/Revenue
The only difference in drawing
the diagrams for perfect
competition or any other
market structure is the shape P D = MR = AR
of the demand curve(AR)
For perfect competition the Output/Sales
AR=MR is perfectly elastic
Cost/Revenue
whereas for other market
structures the demand curve
(AR] curve is normal i.e. slopes P
downward to the right and the
MR curve is place below the AR D =AR
curve (twice the distance] MR
Output/Sales

9. STEP 1
DRAW THE
Cost/Revenue
DEMAND
CURVE D =AR
MR
Output/Sales

10. WHEN AC IS
ABOVE THE AR
STEP 2
MC
WHEN AC IS MC
CURVE IT IS A BELOW THE
LOSS AR CURVE IT
Cost/Revenue
Cost/Revenue
IS A LOSS
AC
D =AR D =AR
MR MR
Q
Output/Sales Output/Sales
PLACE THE AC & MC CURVE

11. STEP 3
MC MC
Cost/Revenue
Cost/Revenue
AC
D =AR
D =AR
MR MR
Q
Output/Sales Q Output/Sales
IDENTIFY THE PROFIT MAXIMISATION LEVEL OF
OUTPUT MC = MR

12. STEP 4
MC MC
Cost/Revenue
Cost/Revenue
LOSS
AC
Abnormal Profit
D =AR D =AR
MR MR
Q
Output/Sales Q Output/Sales
SHADE THE REGION BETWEEN AC CURVE AR CURVE
TO SHOW THE LOSS OR PROFIT

13. Congratulations !! You
have mastered the art
of drawing market
structure diagrams