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If the demand curve is linear (straight line), it has a unitary elasticity at the midpoint. the total revenue is maximum at this point. please explain this
If the demand curve is linear (straight line), it has a unitary elasticity at the midpoint. The total revenue is maximum at this point. PLEASE EXPLAIN THIS - "THE TOTAL REVENUE IS MAXIMUM AT THIS POINT".
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Nidhi taparia
No, the MR curve never intersects AR curve, except in 2 cases - One, in perfect competition when AR = MR at every unit of the good. Two, in imperfect competition when 0 units are sold. That is, they both begin at the same point.
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Nidhi taparia
The MR curve touches x axis means Marginal Revenue or the additional revenue from this unit of the commodity has become zero.
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Nidhi taparia
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This topic is based on the relationship between AR, MR and elasticity. We should know that demand curve is actually the AR curve. When AR curve is unitary elasticity, MR curve intersecting with the x-axis or MR is equal to zero. When MR is zero, TR or total revenue is maximised. Please let me know is you want a deeper explanation or there is some part you didn't understand.
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why the MR curve will touch the x axis ? does it coincides with AR curve ? if yes then why
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Nidhi taparia Best Answer
Also, I would like to thank you Ayushi. Last month I received the award for Best Tutor for answering maximum questions. It's only because of learners like you :) Keep asking and I'll be happy to solve your queries.
Congratulations!! You're most welcome.