So at the moment i'm teaching myself A2 economics over the summer and i understand why MR is steeper than AR, but can anyone prove why MR is two times steeper than AR?
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Why is the Marginal Revenue curve twice as steep as the Average Revenue curve? watch
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Last edited by BR2671999; 10-07-2016 at 13:25.
- 10-07-2016 13:20
- 11-07-2016 15:13
It's only true if we assume the demand curve is linear. (Which you do at A-level).
A linear demand curve is written generally as P = a + bQ
Total revenue is then PQ = aQ + bQ^2
Marginal revenue is then MR = dP/dQ = a + 2bQ
Now you can see that the gradient for AR is b and the gradient for MR is 2b, i.e. twice as steep.Last edited by Speckle; 11-07-2016 at 15:14.