SSC CGL Exam > SSC CGL Videos > SSC CGL Tier 2 - Study Material, Online Tests, Previous Year > Marginal Revenue and Elasticity of Demand
Marginal Revenue and Elasticity of Demand Video Lecture | SSC CGL Tier 2 - Study Material, Online Tests, Previous Year
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FAQs on Marginal Revenue and Elasticity of Demand Video Lecture - SSC CGL Tier 2 - Study Material, Online Tests, Previous Year
| 1. What is marginal revenue and how is it calculated? |  |
Ans. Marginal revenue refers to the additional revenue generated by selling one additional unit of a product or service. It is calculated by dividing the change in total revenue by the change in quantity sold.
| 2. How does elasticity of demand impact marginal revenue? | |
Ans. Elasticity of demand measures how responsive the quantity demanded of a product is to changes in price. When demand is elastic, a decrease in price will lead to a proportionally larger increase in quantity demanded, resulting in a higher marginal revenue. Conversely, when demand is inelastic, a decrease in price will lead to a proportionally smaller increase in quantity demanded, resulting in a lower marginal revenue.
| 3. Can marginal revenue be negative? | |
Ans. Yes, marginal revenue can be negative. This occurs when the decrease in total revenue from selling one additional unit of a product outweighs the additional revenue generated. Negative marginal revenue often happens when a company reduces the price of a product, leading to a decrease in total revenue.
| 4. How is the elasticity of demand related to marginal revenue? | |
Ans. The elasticity of demand and marginal revenue are closely related. When demand is elastic, marginal revenue is positive and increasing. This is because a decrease in price leads to a relatively larger increase in quantity demanded, resulting in higher marginal revenue. On the other hand, when demand is inelastic, marginal revenue is positive but decreasing. This is because a decrease in price leads to a relatively smaller increase in quantity demanded, resulting in lower marginal revenue.
| 5. How can a company use the concept of marginal revenue to maximize profits? | |
Ans. To maximize profits, a company can use the concept of marginal revenue by setting the price of their product or service at the point where marginal revenue equals marginal cost. At this point, the company is producing the quantity that generates the highest additional revenue from selling one more unit while considering the additional cost incurred in producing that unit. By equating marginal revenue and marginal cost, a company can optimize its pricing and production decisions to maximize profits.
Text Transcript from Video
welcome to another noble review session
for students of AP microeconomics today
we're going to focus on the monopolist
demand curve and marginal revenue curve
this graph is showing unregulated
appleís that is producing at a level of
output where it would maximize its
economic profit that's because the
marginal revenue is equal to its
marginal cost the price is on the demand
curve now I know in this region of the
demand curve that the price elasticity
of demand is greater than one it's
elastic the reason I know this is
because the corresponding marginal
revenue in that region of the demand
curve is positive so whenever the
marginal revenue curve is positive the
corresponding demand curve is elastic
this means that as the price rises along
this region total revenue Falls as the
price falls along this region where
marginal revenue happens to be positive
the total revenue will rise that is
consumers are responding to changes in
the price when marginal revenue becomes
negative the corresponding price
elasticity of demand is inelastic so as
the price rises along this region of the
demand curve
I know total revenue will rise and when
the price comes down along this region
the demand curve total revenue will fall
consumers are not very responsive to
changes in price so as long as marginal
revenue is negative the corresponding
demand will be inelastic to find the
region of the demand curve where the
price elasticity of demand is equal to 1
or unit elastic we just find where
marginal revenue is 0 and we travel on
up to the demand curve so I know in this
region since marginal revenue is 0 the
demand is unit elastic when demand is
unit elastic total revenue will remain
constant when the price changes and
summing up remember when marginal
revenue is positive the price elasticity
of demand is greater than 1 its elastic
when marginal revenue is 0 where the
demand curve is unitary elastic and when
marginal revenue becomes negative the
price elasticity of demand is less than
1 or inelastic
thank you for watching other noble
review session please check back often
as we are constantly uploading more and
more movies to help you study
for students of AP microeconomics today
we're going to focus on the monopolist
demand curve and marginal revenue curve
this graph is showing unregulated
appleís that is producing at a level of
output where it would maximize its
economic profit that's because the
marginal revenue is equal to its
marginal cost the price is on the demand
curve now I know in this region of the
demand curve that the price elasticity
of demand is greater than one it's
elastic the reason I know this is
because the corresponding marginal
revenue in that region of the demand
curve is positive so whenever the
marginal revenue curve is positive the
corresponding demand curve is elastic
this means that as the price rises along
this region total revenue Falls as the
price falls along this region where
marginal revenue happens to be positive
the total revenue will rise that is
consumers are responding to changes in
the price when marginal revenue becomes
negative the corresponding price
elasticity of demand is inelastic so as
the price rises along this region of the
demand curve
I know total revenue will rise and when
the price comes down along this region
the demand curve total revenue will fall
consumers are not very responsive to
changes in price so as long as marginal
revenue is negative the corresponding
demand will be inelastic to find the
region of the demand curve where the
price elasticity of demand is equal to 1
or unit elastic we just find where
marginal revenue is 0 and we travel on
up to the demand curve so I know in this
region since marginal revenue is 0 the
demand is unit elastic when demand is
unit elastic total revenue will remain
constant when the price changes and
summing up remember when marginal
revenue is positive the price elasticity
of demand is greater than 1 its elastic
when marginal revenue is 0 where the
demand curve is unitary elastic and when
marginal revenue becomes negative the
price elasticity of demand is less than
1 or inelastic
thank you for watching other noble
review session please check back often
as we are constantly uploading more and
more movies to help you study
About this Video
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Dec 22, 2024 Last updated |
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