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Theme 3
3.3 - Revenues, costs and profits
3.3.1 - Revenue
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Created by
Tayyibah Hussain
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Cards (8)
Total revenue
= quantity x
Price
Average revenue
=
total revenue
/
quantity
Marginal revenue
= change in
total revenue
/ change in
quantity
PED and
revenue
If PED is
elastic
, as
price
increases
quantity demanded
decreases
by a relatively large amount and
revenue decreases.
PED
and
Revenue
If PED is
inelastic
, as
price increases quantity demanded decreases
by a relatively
small amount
and
revenue increases
Total
revenue:
In
markets
where
firms
are
price makers
, the
AR
curve is
downward sloping.
In markets where firms are
price takers
, the
AR
curve is
horizontal.
This shows the
perfectly elastic demand
for their goods