Page 1 - Lession note - Revenue-45
P. 1
Class-XI
Microeconomics
CHAPTER-7
Topic –REVENUE (Module-45)
Sub topic : Relationship among revenue curves Case -II
Short note
Case II: Relationship between Total Revenue and Marginal Revenue when
Price is Constant
MR curve (and AR curve) is a horizontal straight line parallel to the X-axis. Since
MR remains constant, TR also increases at a constant rate (see Schedule).
Due to this reason, the TR curve is a positively sloped straight line (see Figure).
As TR is zero at zero level of output, the TR curve starts from the origin.
Case III: Relationship between Average Revenue and Marginal Revenue
when Price Falls
1. When price falls, with rise in output, then AR falls, MR also falls but at a much
faster rate. As a result, the revenue from every additional unit (i.e. MR) will be
less than AR.
2. As a result, both AR and MR curves slope downwards from left to right. This
can be explained with the help of given Schedule and Figure:
3. In the above schedule, both MR and AR fall with increase in output. However,
the fall in MR is double than that in AR, i.e., MR falls at a rate which is twice the
rate of fall in AR. As a result, MR curve is steeper than the AR curve. When the
