Dirkjan: Created page with "The key relationships with respect to Price elasticity, Marginal revenue and total revenue are described below. At the point of Unity..."

2020-08-25T07:17:40Z

Created page with "The key relationships with respect to Price elasticity, Marginal revenue and total revenue are described below. At the point of Unity..."

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The key relationships with respect to [[Price elasticity|Price elasticity]], [[Marginal revenue|Marginal revenue]] and total revenue are described below. At the point of Unity Elasticity revenue is maximized. With prices higher than the unity price and quantities lower than the unity quantity the [[Marginal revenue|Marginal revenue]] is positive and the price is elastic, which means that consumers will respond to price changes by buying more or less

When the price becomes lower than the unity price [[Marginal revenue|Marginal revenue]] is lower than 0.

<html>
<div id="jxgbox" class="jxgbox" style="height:400px; width:600px;"></div>
<div id="jxgbox2" class="jxgbox" style="height:300px; width:600px;"></div>
</html>

<html>
<script type="text/javascript"charset="UTF-8"src="https://cdn.jsdelivr.net/npm/jsxgraph@1.1.0/distrib/jsxgraphcore.js">
</script>
<link rel="stylesheet"type="text/css"href="https://cdn.jsdelivr.net/npm/jsxgraph@1.1.0/distrib/jsxgraph.cs"/>
</html>
<html>
<script>
var board = CreateDemandCurveBoard();

var origin = board.create('point',[function(){return 0},function(){return 0}], {name:'0',size:1});
var priceslider = board.create('slider', [[0,0],[0,1000], [0.0,180, 1000]], {name:'Price (drag me),size:1'}, {withLabel:false});
var quantityslider = board.create('slider', [[0,0],[1000,0], [0.0,300,1000]], {name:'Quantity (drag me)',size:1}, {withLabel:false});
var demandcurve = CreateDemandCurve (board, priceslider, quantityslider);
var unityglider = CreateUnityObjects (board, origin, priceslider, quantityslider);

var pricepoint = CreatePricePointGlider (board, origin, demandcurve, priceslider, quantityslider);
var marginalrevenueintegral = CreateMarginalRevenueObjects (board, pricepoint, priceslider, quantityslider);

var board2 = CreateTotalRevenueBoard (board, priceslider, quantityslider, pricepoint );

AnimateToStart();

function AnimateToStart() {
pricepoint.moveTo([quantityslider.X(),0], 1500, AnimateToEnd);
setTimeout (AnimateToEnd,3000);
}

function AnimateToEnd() {
pricepoint.moveTo([0,priceslider.Y()], 1500, AnimateToStart);
setTimeout (AnimateToStart,3000);
}

function CreateDemandCurveBoard()
{
var board = JXG.JSXGraph.initBoard('jxgbox', {boundingbox: [-40, 200, 400, -200], keepaspectratio:true, axis:true, showNavigation:false});
JXG.removeEvent(board.containerObj, 'mousewheel', board.mouseWheelListener, board);
JXG.removeEvent(board.containerObj, 'DOMMouseScroll', board.mouseWheelListener, board);

return board;
}

function CreateMarginalRevenueObjects (board, pricepoint, priceslider, quantityslider)
{
var marginalrevenueline = board.create
(
'functiongraph',
[
function(x) {
return priceslider.Y() - x * (priceslider.Y()/quantityslider.X()*2)
},
0,
function(){return quantityslider.X()}]
);

var marginalrevenueintegral = board.create
(
'integral',
[
[
function(){return 0},
function(){return pricepoint.X()}
],
marginalrevenueline
],
{fillColor:'lightblue',withLabel:true}
);

var MarginalRevenueText = board.create('text',
[ function(){return pricepoint.X()},
function(){return pricepoint.Y() - pricepoint.X()/2},
function()
{
var marginalrevenue = priceslider.Y() - pricepoint.X() * (priceslider.Y()/quantityslider.X()*2);
return "Marginal Revenue = " + Math.round(marginalrevenue).toString()
}
]);

return marginalrevenueintegral;
}

function CreatePricePointGlider (board, origin, demandcurve, priceslider, quantityslider)
{
var pricepoint = board.create('glider', [50,150,demandcurve], {name:'Price point (drag)'}, {'strokeColor':'blue'} );
var pricepointY = board.create('point', [0, function(){ return pricepoint.Y()}], {name:'Price',size:1} );
var pricepointX = board.create('point', [function(){ return pricepoint.X()}, 0], {name:'Quantity',size:1} );

var revenuearea = board.create('polygon',[origin,pricepointX, pricepoint, pricepointY], {fillColor:'red'});

return pricepoint;
}

function CreateUnityObjects (board, origin, priceslider, quantityslider)
{
var unityglider = board.create('point', [function(){return quantityslider.X()/2} ,function(){return priceslider.Y()/2}], {name:'Unity elasticity',size:1,strokeColor:'green', fillColor:'green'} );
var unitygliderY = board.create('point', [0, function(){ return unityglider.Y()}], {name:'Unity Price',strokeColor:'green', fillColor:'green',size:1, fillColor:'green'} );
var unitygliderX = board.create('point', [function(){ return unityglider.X()}, 0], {name:'Unity Quantity', strokeColor:'green',size:1, fillColor:'green'} );

var maxrevenue = board.create('polygon',[origin, unitygliderX, unityglider, unitygliderY ]);

var MaxRevenueText = board.create('text',
[ function(){return unityglider.X()},
function(){return unityglider.Y() + 20},
function()
{
var revenue = unityglider.X() * unityglider.Y();
return "Max Revenue = " + Math.round(revenue).toString()
}
]);

return unityglider;
}

function CreateDemandCurve(board, point1, point2)
{
line = board.create
(
'line',
[
[
function(){return point1.X()},
function(){return point1.Y()}
],
[
function(){return point2.X()},
function(){return point2.Y()}
]
],
{'strokeColor':'red', 'dash':'true'}
);

return line;
}

function CreateTotalRevenueBoard (board, priceslider, quantityslider, pricepoint )
{
var board2 = JXG.JSXGraph.initBoard('jxgbox2', {boundingbox: [-40, 15000, 560, -1000], keepaspectratio:false, axis:true, showNavigation:false});
JXG.removeEvent(board2.containerObj, 'mousewheel', board.mouseWheelListener, board2);
JXG.removeEvent(board2.containerObj, 'DOMMouseScroll', board.mouseWheelListener, board2);
board.addChild(board2);

var revenuepoint = board2.create
(
'point',
[
function(){ return pricepoint.X()},
function(){ return pricepoint.X() * pricepoint.Y()}], {name:''}
);

var RevenueText = board2.create('text',
[ function(){return pricepoint.X()},
function(){return pricepoint.X() * pricepoint.Y() + 1000},
function()
{
var revenue = pricepoint.X() * pricepoint.Y();
return "Revenue = " + Math.round(revenue).toString()
}
]);

var revenuefunction = board2.create
(
'functiongraph',
[
function(x){ return x* (priceslider.Y() - x * (priceslider.Y()/quantityslider.X()))},
0,
function(){return quantityslider.X()}
]
);

var elasticintegral = board2.create
(
'integral',
[
[
function(){return 0},
function(){return quantityslider.X()/2}
],
revenuefunction
],
{fillColor:'lightgreen',withLabel:false}
);

var inelasticintegral = board2.create
(
'integral',
[
[
function(){return quantityslider.X()/2},
function(){return quantityslider.X()}
],
revenuefunction
],
{fillColor:'lightblue',withLabel:false}
);

var ElasticText = board2.create('text',
[ function(){return 0.25 * quantityslider.X() + 3},
function(){return 1000},
"Elastic"
]);

var InelasticText = board2.create('text',
[ function(){return 0.75 * quantityslider.X() + 3},
function(){return 1000},
"Inelastic"
]);

return board2;
}

</script>
</html>

* '''Marginal revenue falls as output rises'''.
** Since the demand curve slopes downwards, the addition to total revenue from producing and selling extra units declines.
* '''Average revenue exceeds marginal revenue'''
** When the demand curve is downward sloping,the marginal revenue from selling one more unit falls faster than the average revenue from selling the total output.
* '''The marginal revenue curve declines at twice the rate of the demand (average revenue)curve'''.
* '''When total revenue is increasing,marginal revenue is positive'''
* '''When total revenue is falling,marginal revenue is negative'''
* '''Total revenue is maximized when marginal revenue is zero'''
** Which occurs when the price elasticity is unitary.Therefore,further attempts to increase total revenue by lowering price below P *will fail because the sales volume will not increase sufficiently to compensate for the price fall.

[[Category:economics]]

[[Category:M22]]

[[Category:Term]]

Elasticity, The demand curve and Revenue - Revision history

Dirkjan: Created page with "The key relationships with respect to Price elasticity, Marginal revenue and total revenue are described below. At the point of Unity..."