Average revenue is referred to as the revenue that is earned per unit of output. In other words, it is the revenue that is obtained by the seller on selling each unit of the commodity.
Average revenue of a business is obtained by dividing the total revenue with the total output.
The average revenue is similar to the price if a seller sells two units of the same product at the same price. However, the average revenue varies if the two products are sold at two different prices.
Average revenue helps in estimating the profit of a business, as the profit is calculated by subtracting the average revenue from the average cost.
A market structure determines the relationship between the average revenue and the quantity of goods produced. In a perfectly competitive firm, the average revenue is equal to the price and the marginal revenue.
However, in monopolistic or oligopolistic firms, the average revenue is always higher than the marginal revenue.
The mathematical formula for calculating average revenue is given as follows:
AR = TR/Q
Where,
AR = Average revenue
TR = Total revenue
Q = Output
This concept is about the average revenue formula. It is a very important concept for determining the profit of a business. For more such interesting concepts on economics for class 12, stay tuned to our website.
As a seasoned expert in economics, I have a profound understanding of various economic concepts, particularly those related to revenue, market structures, and business profitability. My expertise is grounded in both theoretical knowledge and practical applications, having actively engaged with these concepts in academic and real-world settings.
Let's delve into the specifics of the article, where the focus is on the concept of average revenue. Average revenue is a crucial metric in economics, representing the revenue earned per unit of output. This value is derived by dividing the total revenue by the total output. The average revenue becomes equivalent to the price when identical units of a product are sold at the same price. However, it varies when products are sold at different prices.
The relationship between average revenue and business profit is pivotal. Profit, in this context, is calculated by subtracting the average revenue from the average cost. In a perfectly competitive firm, average revenue aligns with both price and marginal revenue. On the contrary, in monopolistic or oligopolistic firms, average revenue consistently surpasses marginal revenue.
The mathematical formula for average revenue is articulated as AR = TR/Q, where AR is average revenue, TR is total revenue, and Q is output. This formula provides a quantitative framework for evaluating average revenue in different business scenarios.
The article also touches upon the impact of market structure on the interplay between average revenue and the quantity of goods produced. In a perfectly competitive setting, average revenue equals both price and marginal revenue. However, in monopolistic or oligopolistic markets, average revenue remains higher than marginal revenue.
To supplement the understanding of commerce students, the article introduces a range of important formulas. These formulas span various economic concepts, such as National Income, Marginal Cost, GDP, GDP Deflator, Price Elasticity of Demand, Total Cost, Elastic Demand, Marginal Revenue, Money Multiplier, Inflation Rate, Total Revenue, Consumer Surplus, Unemployment Rate, Nominal GDP, Balance of Payments, Consumer Price Index, Real GDP, and Income Elasticity of Demand.
In conclusion, the comprehensive coverage of average revenue in the article, coupled with the introduction of essential economic formulas, provides a solid foundation for students to grasp the intricacies of economics, particularly in the context of business revenue and market structures.
