Question

Explain Average Revenue (AR) curves.

Answer 1

Average revenue refers to the revenue obtained by the seller by selling a unit of the commodity. It is obtained by dividing the total revenue by the total output.

`AR = (TR)/Q`

Where AR = Average Revenue

TR = Total Revenue

Q = Output

`AR = (Pq)/q = P`

and P = J(Q) is an average curve which shows that price is a function of quantity demanded. It is also a demand curve.