What is the relation between average revenue and marginal revenue?
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Explanation:
In our example, average revenue is = 500/100 = $5. Thus, average revenue means price. Marginal revenue is the addition to total revenue by selling one more unit of the commodity. N = Any given number of units sold
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The price paid by the customers to buy any product is called average revenue whereas marginal revenue is the net income of the seller to buy an additional output.
What is the difference between average revenue and marginal revenue?
- Average revenue is calculated as the total revenue by the total output whereas marginal revenue is calculated as total revenue by the slope of the total revenue curve
- When the cost of average revenue is constant then marginal revenue is equal to the average revenue in perfect competition
- When the marginal revenue curve is below the average revenue curve then marginal revenue decreased
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