Average revenue, total revenue and profit

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5 Terms

1
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Total revenue equation

Price x quantity

2
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Average revenue equation

(revenue per unit)

TR/ Q

Equal to price

3
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Profit equation

(Total revenue) - (Total costs)#

Negative = a loss

4
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Total revenue graph

First half = elastic, as price decreases, revenue increases

Second half - inelastic, as price decreases, revenue decreases

Maximum point - max revenue, unitary elastic

<p>First half = elastic, as price decreases, revenue increases</p><p>Second half - inelastic, as price decreases, revenue decreases</p><p>Maximum point - max revenue, unitary elastic</p>
5
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Average revenue graph

AR = Demand

Price from 0 to £10 = inelastic

Price £10+ = elastic

Midpoint = unit elastic

Area of P1, Q1 = total revenue

<p>AR = Demand</p><p>Price from 0 to £10 = inelastic</p><p>Price £10+ = elastic</p><p>Midpoint = unit elastic</p><p>Area of P1, Q1 = total revenue</p>