Revenue and its Curves Video Lecture | Economics Class 11 - Commerce

before we can start looking at total
average and marginal revenue let's go
ahead and graph these values when we
zoom in I want to show you what the
equations are total revenue is always
just priced times quantity average
revenue is price times quantity but
divided them by the total quantity so in
this case it would just be price
marginal revenue will be the change in
total revenue divided by the change in
quantity in this case since I'm going up
by an in quantity level of one is just
the change in total revenue and not
necessarily relevant to this video but
important to know PE D is to change
percentage change in quantity or the
percentage change in price out our first
level of output total revenue price
times quantity is 20 times 1 which is 20
average revenue here is always going to
be price which is 20 and marginal
revenue is the change from 0 to 20 which
is 20 and the PE D I'm not going to
calculate a PD value for the second set
you can see the math here follows
through the total revenue is 36 average
revenue is again just 18 marginal
revenue now is going to be 16 and we get
a PD calculation of 10 I'm going to fly
through the rest of these values for you
you'll see the video pause here in a
second so you can check your math if you
want you'll see a quick freeze screen
grab and then we'll move forward in
graph since I had done the data on there
front side of the worksheet and the
graph on the back I wanted to put the
two together now for you
the first graph I wanna highlight is
total revenue and you can see the total
revenue curve goes up reaches an apex
and that come starts coming back down
where that corresponds with the demand
curve is really important the demand
curve you will see is a downward sloping
curve that is because the law of demand
says this price goes down quantity
demanded goes up as we've seen that's
also our average revenue curve the data
we've graphed and then the marginal
revenue curve will slip below the
horizontal axis the quantity axis and
importantly where that goes below the
axis that quantity level will be the
same point where our demand curve is
unit elastic and the total revenue curve
hits its peak that relationship between
those three curves is very important
it has strong applicability to our study
of market structures later
so I have my students answer the
questions that are now on the right and
it's relevant to review and reflect in
the elastic region of the demand curve
as price Falls total revenue increases
it's really important because on a paper
three you could be asked about PE D and
how that affects total revenue and the
inelastic region as price Falls total
revenue decreases so it's always good to
be at unit elastic total revenue is
maximized when PE d is equal to one and
marginal revenue is equal to zero those
are very important concepts again moving
forward for your paper three okay while
you will likely not be asked to draw
these three curves necessarily for a
paper three or probably never in a paper
one they're very important to know for
understanding the relationship between
costs revenue and profits and market
structures for your understanding of
theory of the firm Thanks best of luck