Demand curve is the AR curve of a firm.” Do you agree? Discuss briefly, with reason in support of your answer.
Answers
Answer:
Discuss briefly, with reason in support of your answer. Solution: Yes, Average Revenue (AR) is the revenue earned per unit of output. It is same as the price of the commodity. ... Thus, the demand curve is the Average Revenue (AR) curve of a firm.
Explanation:
Yes, I agree with the statement. The following statement supports my answer:
● The average revenue curve is a curve that explains the relationship between the average revenue of a firm which it has earned by selling the good and the quantity of the output of the goods sold.
● Average revenue curve = Total revenue/Quantity
= Price *Quantity/Quantity
=Price.
● The demand curve shows the relationship between the price=AR and the quantity demanded of a good in the market.
● The average revenue curve is basically the price of a good. So, the average revenue curve is also called the demand curve.
(b) The market for a commodity is in equilibrium. The supply of the commodity increases without any corresponding change in the
demand for the commodity. Discuss the impact of the change on the equilibrium price and equilibrium quantity.
● The market is in equilibrium. It means that the quantity demanded is equal to the quantity supplied.
● The supply has increased without any increase in demand.