Revenue
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Revenue
Revenue
Price-taking firm (a) Average and marginal revenue
S
AR, MR (£)
Price (£)
Deriving a firm’s AR and MR: price-taking firm
Pe
D O
Q (millions)
(a) The market
O
Q (hundreds)
(b) The firm
S
AR, MR (£)
Price (£)
Deriving a firm’s AR and MR: price-taking firm
D = AR = MR
Pe
D O
Q (millions)
(a) The market
O
Q (hundreds)
(b) The firm
Revenue
Price-taking firm (b) Total revenue
Total revenue for a price-taking firm Quantity Price = AR (units) = MR (£)
6000
0 200 400 600 800 1000 1200
TR (£)
5000 4000 3000
5 5 5 5 5 5 5
TR (£) 0 1000 2000 3000 4000 5000 6000
2000 1000 0 0
200
400
600
Quantity
800
1000
1200
Total revenue for a price-taking firm Quantity Price = AR (units) = MR (£)
6000
0 200 400 600 800 1000 1200
TR (£)
5000 4000 3000
5 5 5 5 5 5 5
TR (£) 0 1000 2000 3000 4000 5000 6000
2000 1000 0 0
200
400
600
Quantity
800
1000
1200
Total revenue for a price-taking firm Quantity Price = AR (units) = MR (£)
6000
0 200 400 600 800 1000 1200
TR (£)
5000 4000 3000
5 5 5 5 5 5 5
TR
TR (£) 0 1000 2000 3000 4000 5000 6000
2000 1000 0 0
200
400
600
Quantity
800
1000
1200
Total revenue for a price-taking firm TR
6000
TR (£)
5000 4000 3000 2000 1000 0 0
200
400
600
Quantity
800
1000
1200
Revenue
Firm facing a downwardsloping demand curve (a) Total revenue
AR and MR curves for a firm facing a downward-sloping D curve Q P (units) =AR (£) 8 1 7 2 6 3 5 4 4 5 3 6 2 7
8
AR, MR (£)
6
4
2
AR
0 1 -2
-4
2
3
4
5
6
7
Quantity
AR and MR curves for a firm facing a downward-sloping D curve Q P (units) =AR (£) 8 1 7 2 6 3 5 4 4 5 3 6 2 7
8
AR, MR (£)
6
4
2
TR MR (£) (£) 8 6 14 4 18 2 20 0 20 -2 18 -4 14
AR
0 1 -2
-4
2
3
4
5
6
7
Quantity
AR and MR curves for a firm facing a downward-sloping D curve Q P (units) =AR (£) 8 1 7 2 6 3 5 4 4 5 3 6 2 7
8
AR, MR (£)
6
4
2
TR MR (£) (£) 8 6 14 4 18 2 20 0 20 -2 18 -4 14
AR
0 1
2
3
4
5
6
7
-2
-4
MR
Quantity
Revenue
Firm facing a downwardsloping demand curve (b) Average and marginal revenue
TR curve for a firm facing a downward-sloping D curve 20
16
Quantity P = AR (units) (£)
TR (£)
12
1 2 3 4 5 6 7
8
4
TR (£)
8 7 6 5 4 3 2
8 14 18 20 20 18 14
5
6
0 0
1
2
3
4
Quantity
7
TR curve for a firm facing a downward-sloping D curve 20
16
Quantity P = AR (units) (£)
TR (£)
12
1 2 3 4 5 6 7
8
4
TR
TR (£)
8 7 6 5 4 3 2
8 14 18 20 20 18 14
5
6
0 0
1
2
3
4
Quantity
7
Revenue
Revenue and price elasticity of demand
AR and MR curves for a firm facing a downward-sloping D curve 8
AR, MR (£)
Elastic 6
Elasticity = -1
4
Inelastic
2
AR
0 1
2
3
4
5
6
7
-2
-4
MR
Quantity
TR curve for a firm facing a downward-sloping D curve Elasticity = -1 20
tic
El
as
as
el
tic
In
16
TR
TR (£)
12
8
4
0 0
1
2
3
4
Quantity
5
6
7
Revenue
Price-taking firm (a) Average and marginal revenue
S
AR, MR (£)
Price (£)
Deriving a firm’s AR and MR: price-taking firm
Pe
D O
Q (millions)
(a) The market
O
Q (hundreds)
(b) The firm
S
AR, MR (£)
Price (£)
Deriving a firm’s AR and MR: price-taking firm
D = AR = MR
Pe
D O
Q (millions)
(a) The market
O
Q (hundreds)
(b) The firm
Revenue
Price-taking firm (b) Total revenue
Total revenue for a price-taking firm Quantity Price = AR (units) = MR (£)
6000
0 200 400 600 800 1000 1200
TR (£)
5000 4000 3000
5 5 5 5 5 5 5
TR (£) 0 1000 2000 3000 4000 5000 6000
2000 1000 0 0
200
400
600
Quantity
800
1000
1200
Total revenue for a price-taking firm Quantity Price = AR (units) = MR (£)
6000
0 200 400 600 800 1000 1200
TR (£)
5000 4000 3000
5 5 5 5 5 5 5
TR (£) 0 1000 2000 3000 4000 5000 6000
2000 1000 0 0
200
400
600
Quantity
800
1000
1200
Total revenue for a price-taking firm Quantity Price = AR (units) = MR (£)
6000
0 200 400 600 800 1000 1200
TR (£)
5000 4000 3000
5 5 5 5 5 5 5
TR
TR (£) 0 1000 2000 3000 4000 5000 6000
2000 1000 0 0
200
400
600
Quantity
800
1000
1200
Total revenue for a price-taking firm TR
6000
TR (£)
5000 4000 3000 2000 1000 0 0
200
400
600
Quantity
800
1000
1200
Revenue
Firm facing a downwardsloping demand curve (a) Total revenue
AR and MR curves for a firm facing a downward-sloping D curve Q P (units) =AR (£) 8 1 7 2 6 3 5 4 4 5 3 6 2 7
8
AR, MR (£)
6
4
2
AR
0 1 -2
-4
2
3
4
5
6
7
Quantity
AR and MR curves for a firm facing a downward-sloping D curve Q P (units) =AR (£) 8 1 7 2 6 3 5 4 4 5 3 6 2 7
8
AR, MR (£)
6
4
2
TR MR (£) (£) 8 6 14 4 18 2 20 0 20 -2 18 -4 14
AR
0 1 -2
-4
2
3
4
5
6
7
Quantity
AR and MR curves for a firm facing a downward-sloping D curve Q P (units) =AR (£) 8 1 7 2 6 3 5 4 4 5 3 6 2 7
8
AR, MR (£)
6
4
2
TR MR (£) (£) 8 6 14 4 18 2 20 0 20 -2 18 -4 14
AR
0 1
2
3
4
5
6
7
-2
-4
MR
Quantity
Revenue
Firm facing a downwardsloping demand curve (b) Average and marginal revenue
TR curve for a firm facing a downward-sloping D curve 20
16
Quantity P = AR (units) (£)
TR (£)
12
1 2 3 4 5 6 7
8
4
TR (£)
8 7 6 5 4 3 2
8 14 18 20 20 18 14
5
6
0 0
1
2
3
4
Quantity
7
TR curve for a firm facing a downward-sloping D curve 20
16
Quantity P = AR (units) (£)
TR (£)
12
1 2 3 4 5 6 7
8
4
TR
TR (£)
8 7 6 5 4 3 2
8 14 18 20 20 18 14
5
6
0 0
1
2
3
4
Quantity
7
Revenue
Revenue and price elasticity of demand
AR and MR curves for a firm facing a downward-sloping D curve 8
AR, MR (£)
Elastic 6
Elasticity = -1
4
Inelastic
2
AR
0 1
2
3
4
5
6
7
-2
-4
MR
Quantity
TR curve for a firm facing a downward-sloping D curve Elasticity = -1 20
tic
El
as
as
el
tic
In
16
TR
TR (£)
12
8
4
0 0
1
2
3
4
Quantity
5
6
7
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