 We shall discuss some of the concepts in the Unit 6 Concepts of Revenue of your BA Economics for Semester Course. We have divided the unit into three videos and this is the first part of those videos. The title of this video is Concepts of Total Revenue, Average Revenue and Marginal Revenue. In the previous block of the course, we have already discussed the nature of demand from the viewpoint of an individual consumer. In that context, we discussed that consumers demand goods and services as they provide certain utility to the consumer. This means that a product available in the market for sale bought by a consumer has a demand. Let us now consider the matter from the viewpoint of a seller. A seller will be very much concerned with the nature of demand for his product. This is because the monetary revenue of demand of a consumer for the product constitutes his revenue. Thus, the more the demand, the greater will be the volume of revenue earned by the seller. The concept of revenue from the viewpoint of a seller is classified into three types. Average revenue, Marginal revenue and Total revenue. In this video, we shall discuss these three concepts. We have already mentioned the price paid by a consumer for a product constitutes revenue for the seller. It is therefore quite obvious that the more the seller sells, the greater will be the volume of his revenue. As such, the total revenue of a seller depends on two basic things. First, the price of a unit of the product and the sales volume. The price per unit earned gives us average revenue. And the revenue earned by selling an additional unit is called the Marginal revenue. Now what is Total revenue? The whole amount of money received by a seller from selling a given amount of the product is called Total revenue. For example, let us suppose if a seller sells 150 units of pens and each unit of pen is sold at a market price of Rs 12. The Total revenue earned by the seller is in this case Rs 1800. That is Rs 12 multiplied by 150 units. Thus, by definition, Total revenue is market price multiplied by Total quantity sold. Similarly, TR is equal to P multiplied by Q, where TR stands for Total revenue, P stands for market price and Q stands for Total quantity sold. Now what is average revenue? Average revenue is defined as the average value of Total revenue with respect to the number of units sold. Average revenue can be obtained by defining Total revenue by the number of units sold. Thus, average revenue is equal to Total revenue divided by Total quantity sold. Symbolically, we can say, AR is equal to TR divided by Q, where AR stands for average revenue, TR stands for Total revenue and Q stands for quantity. Let us take an example. With reference to our previous example, the average revenue of Rs 12 can also be obtained by dividing Total revenue that is Rs 1800 by Total quantity sold. But that is Rs 150. That means when you divide it, Rs 1800 by 150 units total units sold, we get Rs 12, which is average revenue. Please note, average revenue and price may be the same or it may not be. If the seller sells each unit of the product at the same price, average revenue and price will be the same. If, on the other hand, the seller sells the different units of the product at different prices, average revenue will not be equal to price. For example, suppose a seller sells two units of the product to two different consumers. Say, the seller sells one unit of the product to A at Rs 12, while he or she sells the other unit of the product to P at Rs 10. Thus, the average revenue earned by the seller comes to be Rs 12 plus 10 divided by 2, that is 11, while prices of the two units of the product were Rs 12 and Rs 10 respectively. In practice, we find that the seller sells the individual unit of the product at the same price at a particular point of time. This is because if an individual seller tends to sense higher prices for the product, consumers will move away from him and will purchase the product from other seller who sells at a lower price. As against this, he cannot lower the price of the product at his will. This is because if the seller tries to sell the product at a lower price, the other sellers will follow him and he will face competition in the market. Ultimately, a single price will prevail in the market. As such, in economics, average revenue is taken as equivalent to the price of the product except when we discuss the case of price discrimination. We shall discuss the concept of price discrimination in unit 11 of this course. Another important point to be noted here is that, as we have already mentioned, the money value of demand of the consumer constitutes revenue to the forward seller. As such, the demand curve of the consumer is same as the total revenue curve of the seller. Now, what is marginal revenue? Marginal revenue is the net revenue earned by selling an additional unit of the product. Thus, marginal revenue is obtained when we calculate the sense in total revenue caused by the sale of an additional unit of the product. Thus, marginal revenue is represented as marginal revenue is equal to sense in total revenue divided by sense in total units sold. Simplically, it is represented as MR is equal to delta TR divided by delta Q, where MR stands for marginal revenue, TR stands for total revenue, Q stands for total units sold and delta stands for sense in. Let us take an example. Let us consider the case of marginal revenue in the context of our hypothetical seller, who sells all units of the pants at Rs.12. Suppose the seller increases his sales from 150 units to 151 units. In this case, the total revenue earning of the seller will be Rs.1812. Thus, marginal revenue will be Rs.1812 minus 1800. This is same as average revenue. For example 2. However, the price surged in the extra unit of the product is different. From the price surged in the earlier units, marginal revenue will be different from average revenue. For example, let us suppose that our hypothetical seller sells the 151st unit at Rs.11.50, where he sold all the previous units at Rs.12. Thus, the total revenue earned by the seller is Rs.1811.50 after selling the 151st unit. And the marginal revenue is therefore Rs.1811.50 minus Rs.1800. That is 11.50. In the next video, we shall discuss the relationship between total revenue, average revenue and marginal revenue.