Market Demand Curve Is The Average Revenue Curve

The market demand curve in figure below depicts the amounts that customers as a whole are ready to buy at distinct cost prices. If the market cost price is at p0, customers are ready to buy the quantity q0. On the other hand, if the market cost price is at the lower degree p1, customers are ready to purchase a higher quantity q1.

That is, cost price in the market place influences the quantity demanded by the customers. This is also expressed by saying that the amount bought by the customers is a decreasing function of the cost price. For the monopoly enterprise, the above argument depicts itself from the contrary direction. The monopoly enterprise’s decision to sell a larger amount is feasible only at a lower cost price.

Contrarily, if the monopoly enterprise brings a smaller amount of the good into the market for sale it will be capable to sell at a higher cost price. Hence,

  • For the monopoly enterprise, the cost price relies upon the amount of the good sold
  • The same is also expressed by stating that cost price is a decreasing function of the amount sold
  • Thus, for the monopoly enterprise, the market demand curve expresses the price that customers are ready to pay for different amounts that are supplied
  • This notion is contemplated in the statement that the monopoly enterprise faces the market demand curve, which is downward sloping

Market Demand Curve Is The Average Revenue Curve

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