class 12 market and revenue

TR,AR,MR 7:26 PM

Friday, November 6, 2020

Define market .
Page 52 (book)
What are the types of market ?
Book page 52
What is perfect competition market?
Page 52

Total revenue: the income earned by a seller or producer by selling the output during
time period is total revenue . It can be calculated by multiplying the price by the
quantity of output sold
Symbolically,

Average revenue: per unit revenue of a product is known as average revenue
Symbolically

Marginal revenue: The additional amount of revenue earned by a firm by selling
one more unit of output is called marginal revenue .
Symbolically

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Derive AR MR 4:22 PM

Thursday, November 19, 2020

Derive AR & MR from TR under perfect competition

TR define
AR
MR
Meaning of perfect competition
perfect competition is a market structure where there are large numbers of buyers and sellers in
the marker .The example of perfect competition market to some extent , is agriculture market
where the product are identical i.e. homogeneous
Features of perfect competition
• Large number of buyers and sellers
• Homogenous products are sold in the market.
• There is free entry and exist of the firms
• firms are called price takers
• there is free mobility of factors of production
• no transportation costs

Explanation
Large numbers of sellers are selling homogeneous goods in the market .Market determines the
price. Price is same for all units of goods so forms are price takers. Hence AR=MR=price.
The revenue schedule for competitive form is given below .

units price TR MR AR
0 10 0 - -
1 10 10 10 10
2 10 20 10 10
3 10 30 10 10
4 10 40 10 10
5 10 50 10 10
6 10 60 10 10
7 10 70 10 10
The above table shows the relation between the AR ,MR, TR, price . If there is no output then
no revenue . 10,20,30,40,50,60 are the revenue of the output level 1,2,3,4,5,6. TR increase at
the constant rate. so, each additional units of output is sold at same price. The firm is price
taker . So, revenue at each level can be found by multiplying the price and output

The nature and relation between the AR,MR,TR is explained in the following figure

cost and revenue Page 1

units of commodity
fig: relation between the
In the above figure, revenue are measured along the Y-axis and units of commodity are
measured along the .TR curve is straight upward sloping from origin . it shows that there is
propionate and positive relation between the revenue and output sales The firm sells each
additional units at same price so MR curve overlap with AR curve and parallel to x-axis.
From above table and figure we conclude that
• TR increase at the rate of AR or MR for all levels of sales. For first units of sales TR=MR=AR
• AR and MR are equal and constantan for all levels of sales
• AR and MR are equal to price

cost and revenue Page 2

Monopoly 1:34 PM

Friday, November 20, 2020

Explain the relation between the TR,AR,MR under monopoly .

TR define
AR
MR
Meaning of monopoly
The word monopoly is formed with two words mono and poly which means single seller. the
best example of monopoly in Nepal are Nepal oil corporation ,Nepal Electricity Authority
Features of monopoly
→ Single seller and large number of buyers.
→ No close substitute goods
→ Firms are price maker
→ Strong barriers to entry for new firms
→ profit maximization.

Explanation
Monopoly is a market structure in which single seller or producer produce the goods . There
is no close substitute goods and strong barriers to entry for new forms .Monopoly influence
the price by changing its supply . But it cannot control both price and quantity . If
monopolist want to sell extra units it must decrease the price then previous. So, AR is
greater than MR in monopoly market.

The TR, AR, MR is explained with the help of following table .

units per unit price TR MR AR

0 20 0- -

1 18 18 18 18

2 16 32 14 16

3 14 42 10 14

4 12 48 6 12

5 10 50 2 10

68 48 -2 8

76 42 -6 6

Table: Relation and nature of TR, AR, MR under monopoly
In the above table , TR is found by multiplying quantity and respective price . TR is zero at
zero level of output . Total revenue is Rs 20,36,48,56,60,60,56 for the 1,2,3,4,5,6,7 units of
output sell. TR increase till 5th units and TR become decline .The price and quantity moves in
different direction .

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different direction .
It can be represented in following figure

units of commodity
figure: Revenue curve under monopoly market
In the above figure revenue are measured along y-axis an units of commodity is measured
along the X-axis. TR is initially increase in decreasing rate ,become maximum and then
decrees with the increase in quantity sold. Both AR and MR are downward sloping against the
quantity output sold .MR curve is below the AR curve it shows that to sell extra units
monopolist should reduce the price .
From above table and figure we conclude that
→ TR curve increase at a decreasing rate as long as MR is positive.
→ TR reaches at its maximum when MR becomes zero
→ TR declines when MR is negative
→ Increasing and decreasing rate of TR is MR.
→ AR and MR have positive relationship .
→ MR declines faster than AR
→ MR might be zero negative but AR remains always positive.

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