Which is the other name that is given to the average revenue curve?a)P...
Introduction:
The average revenue curve is an important concept in economics that represents the relationship between the quantity of goods sold and the revenue generated per unit of output. It is also known by another name, which will be discussed in detail in this response.
Explanation:
The average revenue curve is a graphical representation of the average revenue generated by a firm from the sale of its products. It is derived by dividing the total revenue by the quantity of goods sold. The resulting curve represents the average revenue per unit of output.
The other name for average revenue curve:
The other name that is given to the average revenue curve is the demand curve. This is because the average revenue curve is derived from the demand curve.
Relationship between average revenue and demand:
The demand curve represents the relationship between the quantity of goods demanded by consumers and the price at which they are willing to purchase those goods. It slopes downward from left to right, indicating that as the price of a good increases, the quantity demanded decreases, and vice versa.
The average revenue curve, on the other hand, represents the revenue earned by a firm from the sale of its products. It is also downward sloping, as the price per unit of output decreases as the quantity of goods sold increases.
Explanation of the connection:
The reason the average revenue curve is also known as the demand curve is because they are essentially the same curve. This is because, in perfect competition, the average revenue earned by a firm is equal to the price at which it sells its goods.
In perfect competition, firms are price takers, meaning they have no control over the price of their products. They simply take the market price as given. Therefore, the price at which a firm sells its goods is determined by the demand and supply in the market.
Since the average revenue earned by a firm is equal to the price, the average revenue curve coincides with the demand curve. They have the same shape and slope, indicating the relationship between the quantity of goods sold and the price at which they are sold.
Therefore, the other name for the average revenue curve is the demand curve because they represent the same concept and have the same graphical representation.
Conclusion:
The average revenue curve, also known as the demand curve, represents the relationship between the quantity of goods sold and the revenue generated per unit of output. It is derived from the demand curve and is downward sloping, reflecting the relationship between price and quantity in perfect competition. Understanding the relationship between average revenue and demand is crucial in analyzing the behavior of firms and market dynamics.
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