NIOS Economics (318) Notes/Answer| Chapter-19| Revenue

NIOS Economics (318) Notes/Answer| Chapter-19| Revenue. Important questions for NIOS Economics (318) Questions Answers brings you latest queries and solutions with accordance to the most recent pointers SOS . Students will clear all their doubts with regard to every chapter by active these necessary chapter queries and elaborate explanations that area unit provided by our specialists so as to assist you higher. These queries can facilitate students prepare well for the exams thanks to time constraint . NIOS Economics (318) Notes/Answer| Chapter-19| Revenue.

HS 2nd years Solutions (English Medium)

NIOS Economics (318) Notes/Answer| Chapter-19| Revenue

Intext Question

(a) Revenue is the same as __________ 

  1. profits
  2. tax
  3. sales receipts 

Ans. (3) sales receipts

(b) Total revenue from the sale of a product is __________

  1. total cost
  2. total profits
  3. total receipts from sales 

Ans.(3) total receipts from sales

(c) When any quantity of a commodity can be sold at a given price, successive additions to total revenue from sale of additional units of output are__________

  1. lower
  2. higher 
  3. same

Ans. (3) same

(d) When higher sales are possible only by lowering the price, successive additions to TR from sale of additional units of output are __________

  1. lower
  2. higher
  3. same

Ans. (1) lower 

2. Tick (v) mark the correct answer:

(a) Average revenue from the sale of output of product equals:

  1. TR divided by quantity produced 
  2. Net addition to TR

Ans. (1) TR divided by quantity produced

(b) When any quantity can be sold at a given price, as a producer produces more of a product, AR__________

  1. falls
  2. rises
  3. remains constant 

Ans. (3) remains constant

(c) When higher sales are possible only at a lower price, as a producer wants to sell more of his product, AR__________

  1. falls
  2. rises
  3. remains constant

Ans. (1) falls

3. Fill in the blanks:

(a) Net addition to__________on account of increase in sales by one unit is called MR.

Ans. TR

(b) Sales increase from 3 units to 4 units as a result, TR rises from RS.100 to Rs.125 MR is__________

Ans. Rs.25

(c) When more sales are possible only at a lower price, sale of additional units of a commodity__________ MR.

Ans. lowers

(d) When higher sales are possible at a given price, sale of additional units of a commodity MR__________

Ans. remains constant

(e) When TR falls MR is __________ 

Ans. negative

Terminal Exercise

1. Explain the term ‘revenue’. How is it different from profit? 

Ans. A producer or a firm produces goods and services for sale in the market. The receipt from selling a product is termed as ‘revenue’ from that product.

Differences between revenue and profit are as follows: 

  1. Revenue is money earned by selling main goods and/or services to customers. Whereas profit is net earnings of a business left after deduction of all expenses
  2. Revenue = Total Sales – Total Returns. On the other hand, Profit = Total Revenue – Total Expenses. 
  3. Revenue is also known as Sales, Sales Revenue, Turnover,Gross Income. Whereas profit is also known as Bottom Line, Net Profit, Net Earnings

2. Prepare a schedule based on imaginary data about TR, AR and MR assuming that the price is the same at all the levels of output.

Ans. 

Total revenue (TR)

Total revenue of a firm is defined as the total sales proceeds in the market. The firm sales different quantities of the product to its customers at the prevailing market price. So the total revenue can be calculated by multiplying price with quantity. Symbolically

TR=Q x P

Where, TR = Total revenue

P = Price

Q = Quantity. 

In the table, level of output and the price of the radio given Copy table no 19.1 pg no. 270

As an example, total revenue when 2 radios are produced and sold is

TR=Qx P

=2x RS.200 = Rs 400

It is now clear that the total revenue that a firm receives is determined by 

(i) the quantity of the product sold and 

(ii) the price per unit of the product.

In the table above notice that the price per radio remains same at all levels of output. It means that a producer sells all units of a commodity per unit of time at the same price.

It is only one type of market situation where a firm can sell any quantity at a given price. In actual life we came across another in which if a firm wants to sell more it must reduce the price. The firm must induce the buyer to buy more. Reduced price of a product is generally a big temptation for buyer, as we know if we want to buy anything in bulk in the market we can bargain for a lower price.

Average Revenue (AR)

AR is defined as the ratio of total revenue to quantity of the product. Symbolically,

AR=TR/Q

Copy table 19.3 pg 272

In the table, TR at 2 units of output is 400.

Therefore, AR = = Rs.200

Rs.200 is also the price of radio. We can see in the table that AR and price at each level of output are the same. Normally, a producer sells all the units of a commodity per unit of time at the same price. Therefore, his AR is also the same price. We can show this in the following manner:

We are given that AR = …………. (i)

We are also given TR = P x Q 

By substituting the value of TR in (i), we get

Therefore, AR === P

AR= P

In fact price and average revenue are synonyms. 

Marginal revenue (MR)

Marginal revenue is defined as the increase in the total revenue due to an extra unit of the commodity sold by the firm in the market. In other words MR is the addition to TR as a result of the additional unit of the good sold.

Copy table 19.5 pg 274 

In the table, TR from sale of 1 radio is Rs.200. TR from the sale of 2 radios is Rs.400.

Therefore, MR when 2 radios are sold = TR of 2 radios – TR of 1 radio.

By increasing his sale of radios by 1 unit the producer is able to increase his TR by Rs.200. such an increase in TR from the sale of an additional unit of output is the MR.

3. Prepare an imaginary TR, AR and MR schedule in a market situation in which the firm is able to sell more only by reducing the price of the product.

Ans. Total revenue (TR)

In actual life we came across a situation in which if a firm want to sell more of its product, it must reduce the price. The firm must induce the buyer to buy more. Reduced price of a product is generally a big temptation for buyers, as we know if we want to buy anything in bulk in the market we can bargain for a lower price. This behaviour is not strange. As we know that consumers normally demand more only at a lower price.

Whatever the market situation, the method of calculation of total revenue or any other measure of revenue remains the same. For example, consider the following table

Copy table 19.2 from pg no. 271 

Although the method of calculation of TR is the same, the difference arises only in the successive additions to TR. When price is the same at all the levels of output the successive additions to TR on account of increase in output is also the same. When price falls as the output level increases (as given in the table above) the successive additions to TR also fall.

Average Revenue (AR)

We have already learn, a market situation in which a producer is able to sell all quantities of output at a given price. Now we will learn the market situation in which the producer is able to sell higher quantities only by offering his product at a lower price.

Copy table 19.4 from pg 273

The above table shows that price is not constant, but price and average revenue at each level of sales are equal.

Marginal revenue (MR)

From the table given below, we will learn the market situation in which price is not constant but changes. 

Copy table 19.6 pg. 275

It is shown in the table that the producer tempts the consumer to purchase more shirts by offering the shirt at a lower price. In order to induce the consumer to buy 2 shirts instead of 1 he offer to sell each shirt at Rs.90 instead of 100. He is able to get a TR of Rs. 180 from the sale of two shirts. If he had sold only I shirt he would have got a price of Rs.100

per shirt and a TR of Rs. 100. By increasing his sale by 1 shirt the producer is able to increase his TR by Rs.80. It represents the MR when 2 shirts are sold. Similarly we can calculate MR when 3 shirts are sold and so on. 

NIOS Class 12th Economics (318) Notes/Question Answer

Chapter Chapters NameLink
Chapter 1Economy and Its ProcessClick Here
Chapter 2Basic Problems of an EconomyClick Here
Chapter 3Economic Development and Indian EconomyClick Here
Chapter 4Statistics: Meaning and ScopeClick Here
Chapter 5Making Statistical Data MeaningfulClick Here
Chapter 6Presentation of Statistical DataClick Here
Chapter 7Statistical MethodsClick Here
Chapter 8Index Numbers (Meanings and Its Construction)Click Here
Chapter 9Index Numbers (Problem and Uses)Click Here
Chapter 10Income FlowsClick Here
Chapter 11National Income: ConceptsClick Here
Chapter 12National Income: MeasurementClick Here
Chapter 13Uses of National Income EstimatesClick Here
Chapter 14What micro EconomicsClick Here
Chapter 15What affects demandClick Here
Chapter 16What affects supplyClick Here
Chapter 17Price determinationClick Here
Chapter 18CostClick Here
Chapter 19RevenueClick Here
Chapter 20Profit maximizationClick Here
Chapter 21Government budgetingClick Here
Chapter 22Money supply and its regulationClick Here
Chapter 23Need for planning in IndiaClick Here
Chapter 24Achievements of planning in IndiaClick Here
Chapter 25Recent economic reforms and the role of planningClick Here

Optical Module – I

Chapter 26AgricultureClick Here
Chapter 27IndustryClick Here
Chapter 28Independence of Agriculture and IndustryClick Here
Chapter 29Transport and CommunicationClick Here
Chapter 30EnergyClick Here
Chapter 31Financial InstitutionsClick Here
Chapter 32Social Infrastructure (Housing, Health and Education)Click Here

Optical Module – II

Chapter 33Direction and composition of India’s Foreign tradeClick Here
Chapter 34Foreign exchange rateClick Here
Chapter 35Balance of trade and balance of paymentsClick Here
Chapter 36Inflow of capital (Foreign Capital and Foreign Aid)Click Here
Chapter 37New trade policy and its implicationsClick Here
Chapter 38Population and economic developmentClick Here
Chapter 39Population of IndiaClick Here

4. Complete the following table:

Output (units) Price (Rs)TR(Rs)AR(Rs)MR(Rs)
15
25
35
45
55

Ans 

Output (units)Price (Rs)TR(Rs)AR(Rs)MR(Rs)
15555
251055
351555
452055
552555

5. Complete the following table:

Output (unitsPrice (Rs)TR(Rs)AR(Rs)MR(Rs)
15
24
33
42

Ans.

Output (unitsPrice (Rs)TR(Rs)AR(Rs)MR(Rs)
15555
24843
33931
4282-1

6. Find out marginal revenue from the following data

Output (units)Average Revenue (Rs.)Marginal Revenue (Rs.)
125
223
321
419
518
615

Ans

Output (units)AR(Rs.)TR(Rs.)MR(Rs.)
12235
2254622
3216317
4197616
5189014
615900

7. Complete the following table:

Price (Rs)Output (units)Total Revenue (Rs)
10100
119
1296
137
1484
155
1664

Ans.

Price (Rs)Output (units)Total Revenue (Rs)
1010100
11999
12896
13791
14684
15575
16460

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