Economics Definition Average Revenue Product

According to dooley the revenue of a firm is its sales receipts or money receipt from the sale of a product.

Economics definition average revenue product. Since average revenue equals price demand curve facing a firm is itself average revenue curve of the firm. In order to calculate average product you simply divide total product by variable inputs. Average product is the average output or products produced by each input often number of employees. Total revenue generated per unit of a variable input keeping all other inputs unchanged.

It is obtained by dividing the total revenue by total output. Average revenue product usually abbreviated arp is found by dividing total revenue by the variable input. That is the curve showing the relationship between price and demand also shows the relation between the average revenue and total amount sold. The average revenue curve shows that the price of the firm s product is the same at each level of output stonier and hague.

The average revenue product of a factor is given by the factor s average physical product multiplied by the average revenue or price of the product. See marginal revenue product. The average revenue product together with average cost indicates to a firm how many factor inputs to employ in order to maximize profit in the short run. Term average revenue product definition.

Average product is different from average revenue product which equals the revenue earned per factor of production while keeping other factors constant. In other words revenue is the income that an organization receives from normal business activities. Revenue can be defined as receipts or returns from the sale of products of an organization. Average revenue product is most often used in the analysis of the demand for productive inputs.

Average revenue definition the total receipts from sales divided by the number of units sold frequently employed in price theory in conjunction with marginal revenue. Average physical product indicates our unit total production from employing a given quantity of a variable input. Average revenue product is the unit revenue generated by the use or employment of different quantities of a variable input.