Revenues and Profits

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Revenues and Profits

  1. 1. A2 Microeconomics - Tutor2u Revenues and Profits
  2. 2. Revenues Revenue Average Revenue = Demand Output Sold
  3. 3. Revenues Revenue P1 Average Revenue = Demand Q1 Output Sold
  4. 4. Revenues Revenue Total Revenue = Price x Quantity (P1 x Q1) P1 Average Revenue = Demand Q1 Output Sold
  5. 5. Revenues Revenue Total Revenue = Price x Quantity (P1 x Q1) P1 Cutting the price from P1 to P2 causes total revenue to rise P2 Average Revenue = Demand Q1 Q2 Output Sold
  6. 6. Revenues Revenue Total Revenue = Price x Quantity (P1 x Q1) P1 Cutting the price from P1 to P2 causes total revenue to rise B P2 A C Q1 Area A+ B is smaller than A+C Average Revenue = Demand Q2 Output Sold
  7. 7. Revenues Revenue If a fall in price causes total revenue to rise – then marginal revenue will be positive P1 B P2 A C Q1 Average Revenue = Demand Q2 Output Sold
  8. 8. Revenues: Average and Marginal Revenue (AR and MR) Revenue Average Revenue Marginal Revenue Output Sold
  9. 9. Revenues Revenue P1 Average Revenue Q1 Marginal Revenue Output Sold
  10. 10. Revenues Revenue When MR = zero, total revenue is maximised P1 Average Revenue Q1 Marginal Revenue Output Sold
  11. 11. Analysis of Revenues, Costs and Profits Costs & Revenue MC AC AR MR Output
  12. 12. The Profit Maximising Output Costs & Revenue MC AC AR MR Q* Output
  13. 13. The Profit Maximising Price Costs & Revenue MC AC P* AR MR Q* Output
  14. 14. The Profit Maximising Price Costs & Revenue MC AC P* AR AC MR Q* Output
  15. 15. The Profit Maximising Price Costs & Revenue MC AC P* SNP AR AC MR Q* Output
  16. 16. Analysis Diagram for a Loss-Making Business Costs & Revenue MC MR AR Output AC
  17. 17. Loss-Making Business Costs & Revenue MC C1 MR (MR=MC) Q1 AR Output AC
  18. 18. Loss-Making Business Costs & Revenue MC C1 P1 MR (MR=MC) Q1 AR Output AC
  19. 19. Loss-Making Business – Price < AC (subnormal profits) Costs & Revenue MC C1 P1 MR (MR=MC) Q1 AR Output AC
  20. 20. Get help from fellow students, teachers and tutor2u on Twitter: #econ3 @tutor2u_econ

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