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What is Average Revenue in Economics?

Here we understand the Concept of Average Revenue with example in detailed.

What is Average Revenue in Economics?
Average Revenue is the revenue per unit and therefore it is defined as the total revenue divided by total amount sold.
where, AR = Average revenue, TR = total revenue and Q = Total amount sold.
Since TR = PQ
AR = PQ/Q
AR = P.
It follows that average revenue is equal to price.
For example :
Suppose 100 units are sold at Rs. 10 per unit. In this case total revenue is 100 * Rs. 10 = Rs. 1000.
Therefore, AR = 1000 (TR)/100 (Q) = Rs. 10
Since, average revenue equals price, demand curve facing a firm is itself average revenue curve of the firm. That is the curve showing the relationship between price and demand also shows the relation between the average revenue and total amount sold.


What is Average Revenue
Total Revenue
Total amount sold
Average Revenue.
Kinnari
Tech writer at NewsandStory
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