Agrawal Institute

Economics

Revenue
 Total Revenue (TR)

It is the total money receipt from sale of output.

P = Price per unit

It is the revenue per unit of output.

also AR = P AR curve is also

It is the addition to total revenue from sale of one additional

Or MR is the slope of
TR
∆𝑻𝑹
𝑴𝑹 =
∆𝑶𝒖𝒕𝒑𝒖𝒕
 Relation between TR & MR

Case-1: Perfect Market (Competitive Market) – Price is constant

Price Quantity TR MR
In this market
(P) (Q)
• Price = MR = AR
10 1 10 10
• Firm is price taker.
10 2 20 10
• TR increases at constant rate and
10 3 30 10 MR is parallel to X – axis (i.e
10 4 40 10 constant)
10 5 50 10
 Relation between TR & MR
Case-2: Imperfect Market (Non - Competitive Market) –
Price is not constant
Price (P) Quantity (Q) TR MR
10 1 10 10 In this market
9 2 18 8 • When TR increases at
8 3 24 6 diminishing rate, MR falls but
7 4 28 4 remains positive.
6 5 30 2 • When TR is maximum, MR = 0
5 6 30 0 • When TR falls, then MR become
4 7 28 -2
negative.
3 8 24 -4
 Relation between AR & MR

Case-1: Perfect Market (Competitive Market) – Price is constant

Price Quantity TR AR MR
(P) (Q)
• When price is constant, then AR =
10 1 10 10 10
MR
10 2 20 10 10
• Both AR and MR are constant.
10 3 30 10 10 • AR and MR curves are parallel to
10 4 40 10 10 X – axis (Coincide each other)
10 5 50 10 10
 Relation between AR & MR
Case-2: Imperfect Market (Non - Competitive Market) –
Price is not constant
Price (P) Quantity (Q) TR AR MR Ratio of Fall
(MR : AR)
10 1 10 10 10 N/A
9 2 18 9 8 2:1
8 3 24 8 6 2:1
7 4 28 7 4 2:1
6 5 30 6 2 2:1
5 6 30 5 0 2:1
4 7 28 4 -2 2:1
 Relation between AR & MR
Case-2: Imperfect Market (Non - Competitive Market) –
Price is not constant

• More output can be sold only by reducing price.

Unit Sold Price (₹) TR AR MR

1 5

2 4

3 3

4 2
Q.2 – Calculate TR, AR and MR.
Unit Sold Price (₹) TR AR MR

1 100

2 95

3 90

4 85

5 80
Q.4 – Calculate TR, AR and MR.
Unit Sold Price (₹) TR AR MR
7 10
6 20
5 30
4 40
3 50
2 60
1 70
Q.5 – Calculate TR, AR and MR.
Unit Sold Price (₹) TR AR MR
10 10
9 20
8 30
7 40
6 50
5 60
4 70
Q.6 – Determine AR and MR.
Unit Sold TR (₹) AR MR
1 20
2 36
3 48
4 56
5 60
6 60
7 56
Q.8 – Determine TR and MR.
Unit Sold AR (₹) TR MR
1 25
2 23
3 21
4 19
5 18
6 15
Q.9 – Complete the following table:-
Unit Sold TR (₹) MR (₹) AR (₹)
1 10 10 ……
2 …… …… 9
3 24 …… ……
4 …… 4 7
5 30 …… 6
6 30 0 ……
7 28 …… 4
8 …… -4 3
Q.10 – Complete the following table:-
Unit Sold TR (₹) AR (₹) MR (₹)
4 48 …… ……
5 …… 10 ……
6 …… …… -2
7 42 …… ……
Q.11 – Complete the following table:-
Unit Sold TR (₹) MR (₹) Price (₹)
1 4 …… ……
2 6 …… ……
3 6 …… ……
4 4 …… ……
Q.12 – Calculate TR and AR.
Unit Sold MR (₹) TR AR
1 10
2 8
3 6
4 4
5 2
6 0
7 -2
Q.13 – Complete the following table:-
Unit Sold AR (₹) MR (₹) TR (₹)
1 6 …… 6
2 …… 4 ……
3 4 …… ……
4 …… 0 ……
5 2 …… 10
Q.15 – Complete the following table:-
Price (₹) Output TR (₹) MR (₹)
(units)
…… 1 …… 5
4 …… 8 ……
…… 3 …… 1
2 …… 8 ……
Q.16 – Calculate TR and AR.
Unit Sold MR (₹) TR AR
0 -
1 14
2 10
3 7
4 5
5 0
6 -3
7 -5
Q.18 – Complete the following table:-
Unit Sold AR (₹) MR (₹) TR (₹)
1 10 10 10
2 …… 8 ……
3 8 …… ……
4 …… 0 ……
5 …… …… 20
Q.19 – Complete the following table:-
Price (₹) Output TR (₹) MR (₹)
(units)
7 …… 7 ……
…… 2 10 ……
…… 3 …… -1
1 …… …… -5
Q.20 – A shopkeeper sold 25 calculators at the price of ₹ 125 each.
His total receipts increased to ₹ 3,380 after selling 26 calculators. At
what price did he sell the 26th calculator?
Q.21- When sale of a unit increased from 20 unit to 35 units, the total
revenue increased by ₹ 1,200. Calculate marginal revenue.