Concept of Revenue Class 11 | Chapter 9 | Economics | Notes |

CONCEPT OF REVENUE CLASS 11 | CHAPTER 9 |ECONOMICS

Revenue

Whatever money a firm receives by selling a commodity is called its revenue.

Revenue=Cost=Profit

Concept of Total Revenue

1) Total revenue (TR) – It is the sum total of money receipts of a firm from the sale of its total output.

TR=AR×Q

2) Marginal revenue (MR) – It is the change in TR when an additional unit of commodity is sold. MR is rate of TR.

∑MR=TR     or       MR_n=TR_n-TR_(n-1)

MR=∆TR/∆Q

3) Average revenue (AR) – It is the revenue per unit of output sold. It is the same as price of the commodity.

AR=TR/Q

Firm’s Demand Curve

It is a curve showing relationship between price of the product and its quantity demanded in the market. It is also known as AR curve and firm’s price line.

Firm’s Revenue Curve in Different Market

1) Perfectly Competitive Market – Under perfect competition, price remains to be constant. So firm is a price taker. It cannot change the market price. It can sell any quantity at the prevailing price.

Unit	AR	TR	MR
1	10	10	10
2	10	20	10
3	10	30	10
4	10	40	10
5	10	50	10

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Consumer Equilibrium Utility Analysis	Consumer Equilibrium Indifference Curve Analysis
Theory of Demand Change in Demand	Price Elasticity of Demand
Production Function and Returns to a Factor	Concept of Cost
Concept of Revenue	Producer’s Equilibrium
Theory of Supply	Forms of Market
Market Equilibrium Under Perfect Competition	NCERT Solutions of Class 11 English
Writing Section Class 11 English	Grammar & MCQ of Grammar

Relationship Between TR, AR and MR

• TR increases at constant rate, MR is constant.
• P=AR=MR

2) Monopoly Market and Monopolistic Competitive Market – Under this, price is not constant. A firm can sell any quantity but it has to reduce the price. There is a negative or inverse relationship between, the price of the product and demand for the product. Accordingly, firm’s AR curve and MR curve slopes downward.

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

     

Relationship between TR And MR

• TR increases at diminishing rate, MR diminishes.
• When TR maximum, MR is zero
• TR decline, MR negative
• As long as MR positive, TR will increase

Relationship between AR And MR

• When AR is decreasing, MR decreases faster than AR
• MR can be zero or negative, but AR can not be zero or negative

 

 

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