Study Notes
Revenue Curves in Competitive Markets
- Level:
- A-Level, IB
- Board:
- AQA, Edexcel, OCR, IB, Eduqas, WJEC
Last updated 21 Mar 2021
In a perfectly competitive market, total revenue (TR) is a diagonal straight line passing through the origin. Market demand and supply determine the price and each firm is a price taker.
Thus, average revenue is constant
Thus, average revenue – marginal revenue at the prevailing market price
Changes in the market price will bring about a change in the gradient of the total revenue curve for firm in a perfectly competitive market
TR when there is a rise in market price
A rise in market price leads to an increase in the gradient of the total revenue curve
TR when there is a fall in market price
A fall in market price leads to a reduction in the gradient of the total revenue curve
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