Relation between Average Revenue, Total and Marginal Revenue

Question

Illustrates the relation between Average Revenue, Total Revenue and Marginal Revenue?

Answer 1

The relationship between Average Revenue, Total Revenue and Marginal Revenue can be understood with the assist of the illustrated table:

The study of the given table reveals as follows:

1. As long as Average Revenue is falling, Marginal Revenue will be less than Average Revenue

2. Marginal Revenue falls more steeply than Average Revenue

3. Total Revenue will be rising as long as Marginal Revenue is positive

4. Where Marginal Revenue is negative, Total Revenue will be falling

5. Total Revenue will be maximization at the point where Marginal Revenue is Zero.

The relation in between elasticity of demand and Total Revenue can be summarized as given below: