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Letting TR be the total revenue function: () = (), [1] where Q is the quantity of output sold, and P(Q) is the inverse demand function (the demand function solved out for price in terms of quantity demanded).
The marginal revenue function has twice the slope of the inverse demand function. [9] The marginal revenue function is below the inverse demand function at every positive quantity. [10] The inverse demand function can be used to derive the total and marginal revenue functions. Total revenue equals price, P, times quantity, Q, or TR = P×Q ...
Total revenue, the product price times the quantity of the product demanded, can be represented at an initial point by a rectangle with corners at the following four points on the demand graph: price (P 1), quantity demanded (Q 1), point A on the demand curve, and the origin (the intersection of the price axis and the quantity axis).
where R is total revenue, P(Q) is the inverse of the demand function, and e < 0 is the price elasticity of demand written as = (). [ 27 ] Monopolist firm, as a price maker in the market, has the incentives to lower prices to boost quantities sold. [ 17 ]
For example, if the demand equation is Q = 240 - 2P then the inverse demand equation would be P = 120 - .5Q, the right side of which is the inverse demand function. [13] The inverse demand function is useful in deriving the total and marginal revenue functions. Total revenue equals price, P, times quantity, Q, or TR = P×Q.
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Profit maximization using the total revenue and total cost curves of a perfect competitor. To obtain the profit maximizing output quantity, we start by recognizing that profit is equal to total revenue minus total cost (). Given a table of costs and revenues at each quantity, we can either compute equations or plot the data directly on a graph.
Fast food gets a bad rap for being unhealthy, but there are healthy fast food options at chains like McDonald’s, Pizza Hut, and Sonic. Dietitians explain.