Thursday, December 13, 2007

Demand and MR Again


The question 1 in Part 3
Internet Browsers
How to draw and calculate the Marginal Revenue based on the Demand Curve??


Graphically, the marginal revenue curve has the same P-axis intercept as the demand curve and is twice as steep (i.e. has a slope twice as large in absolute value). Mathematically, the easiest way to find it is to solve for P in the demand curve and then multiply the slope by 2. For example:

Qd = 40-2P
2P = 40-Qd
P = 20-Qd/2
so then MR = 20-Q, and you can go back and solve for Q.

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