1 / 13

Main Market Forms & Concepts of Revenue

Main Market Forms & Concepts of Revenue. June 27, 28. Introduction . The determination of prices and outputs of various products depends upon the type of market structure.

kina
Download Presentation

Main Market Forms & Concepts of Revenue

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Main Market Forms & Concepts of Revenue June 27, 28

  2. Introduction • The determination of prices and outputs of various products depends upon the type of market structure. • Meaning of Market is economics state a situation where buyer and seller is in contract with each other to transact commodities at an agreed price. It does not means any place.

  3. Classification of Market Forms

  4. Concepts of revenue • A producer or seller of a commodity is very much concerned with the demand of the consumer for the commodity. Because it manipulate a seller’s earning or revenue. From the stand point of seller, demand curve for a product is the average revenue cure. • Average revenue:- An average revue (AR) can be obtained by dividing the total revenue by the number of units sold. Thus AR = total revenue divided by the total output.

  5. Marginal revenue • Marginal revenue (MR) is the net revenue earned by selling an additional unit of product. In other words, marginal revenue (MR) is the addition made to the total revenue by selling one more unit of a commodity.

  6. AR under perfect competition • When there prevails a perfect competition in the market for a product, demand curve facing an individual firm is perfectly elastic and the price is beyond the control of a firm, so average revenue curve remains constant. AR & MR AR = MR P 0 Quantity

  7. Exercise • Numbers of units sold are 1, 2, 3,4, 5, 6,. Price of the good is Tk 16, so write down a table consist of AR and MR under perfect competition market condition ?

  8. AR under imperfect competition • When imperfect competition prevails in the market for product, an individual firm producing that product face downward sloping demand curve. Which means when price falls then sale of addition units increase. Marginal revenue may be obtained by the difference between two successive total revenue decrease as well. Point is MR is less than AR.

  9. AR under imperfect competition • How MR can be obtained from the changes in TR and what relation it bears with AR can be easily grasped from looking at the graph below:- AR and MR AR MR Quantity 0

  10. Table for TR, AR, and MR under imperfect competition

  11. Equilibrium of the firm: MR and MC approach • MR means the addition made to the total revenue by producing and selling an extra unit of output and MC means the additional made to the TC by producing an additional unit. • Now a firm will go on expanding its level of output until MC < MR, because it will be profitable. It will not be profitable for the firm to produce a unit of output where MC>MR. • So the equilibrium position is, the level of output where MC=MR.

  12. Continue • This equilibrium is in point E, where MC=MR. So equilibrium output level is OM. • Graph:- MR, MC MC (supply) A C E B MR (demand) D H M L 0 Output

  13. Second order condition of equilibrium • For a firm to be equilibrium, MC curve must cut MR curve from below at the point of equilibrium, that will as follows:- MC E F MR 0 Output

More Related