Revenue refers to the amount received by a firm from the sale of a given quantity of a commodity in the market. The concept of revenue consists of three important terms:
1. Total Revenue 2. Marginal Revenue 3. Average Revenue
Relationship between TR,MR and MR
1.In Perfect Competition
In this market there are large number of buyers and sellers and the product is homogeneous (identical). Price remains same, that is a producer can sell any quantity at constant price.
1.In perfect competitive marker Price remains constant so TR increases at constant rate and MR is constant. Here AR = MR = P.
2. TR curve is positively sloped straight line. AR and MR curves coincide in a horizontal
straight line
2. In Non Perfect Competition( monopoly, monopolistic or Oligopoly market)
In such market producer can sell more product by lowering the price, that is if the producer can sell only less product at higher prices. Relationship between TR and MR
1. When MR falls positively, TR increases.
2. When MR becomes zero, TR is maximum. 3. When MR becomes negative, TR decreases.
Relationship between AR and MR
1. AR falls when MR is less than AR(MR<AR,AR falls).
2. AR is maximum and Constant when MR carve is equal to AR(MR=AR ,AR is maximum). 3. AR increases as long as MR is higher than AR (when MR>AR,AR increases)
