Why Average Revenue is the same as the Demand Curve

In Unit 3 Business Economics we are told that D = AR, but why is this?

AR is average revenue, and the calculation for average revenue is Total Revenue / Quantity.

Total Revenue = Price * Quantity

Therefore AR = Price * Quantity / Quantity => Price (as the Quantity is cancelled out)

Hence AR = P, and D = P so we can say that D = AR.

2 thoughts on “Why Average Revenue is the same as the Demand Curve

    • The demand curve tells us for every price what is the quantity demanded. Therefore D=P. If the price equals average revenue (as explained above) then the demand function also tells us this, as it is telling us the quantity demanded for each price point.

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