AR, MR and Elasticity of Demand

AR, MR and Elasticity of Demand

Introduction

Profit making is considered to be the most important objective of firm. Like the consumers aim at utility maximisation, the producers aim at the profit maximisation. Profit is a difference between total cost and total revenue.Profit can be increased either by reducing the cost of production or by increasing the revenue. In this unit, we are going to learn various concepts of total revenue, the behiour of revenue under different market conditions and the importance of concept of revenue.

Learning Objectives

After reading this chapter, you are expected to learn about:

1. Define various concepts of revenue.
2. Using data, understand the calculation of different concepts of revenue.
3. Understand the relationship between different concepts of revenue under perfect competition.
4. Understand the relationship between different concepts of revcnue under imperfect competition.
5. Establish relationship between average revenue, marginal revenue and elasticity of demand.