CBSE Class 12 Microeconomics Chapter 6: Non-Competitive Markets NCERT Solutions

Solution: The demand curve illustrates the relationship between the price of a good and the quantity consumers are willing to buy. The total revenue curve shows how total revenue changes with the quantity sold. The shape of the demand curve dictates the shape of the total revenue curve.

1. If the total revenue curve is a positively sloped straight line passing through the origin, it means that as the quantity sold increases, total revenue increases at a constant rate. This scenario occurs when the price of the product remains constant regardless of the quantity sold. Consequently, the demand curve (which represents price at different quantities) must be a horizontal line parallel to the quantity axis, indicating perfectly elastic demand. In this case, Average Revenue (AR) equals Price (P), and Marginal Revenue (MR) also equals Price (P).

   Price (Rs)

   $Dd\; =\; AR\; =\; MR\; =\; P$

   Quantity (Units)

2. If the total revenue curve is a horizontal line, it implies that total revenue remains constant irrespective of the quantity sold. This can only happen if the price of the product is reduced to sell more units, but the increase in quantity exactly offsets the decrease in price in terms of total revenue, which is not a typical scenario for a single horizontal TR curve. However, if the question implies that TR is constant, it usually relates to a situation where the firm faces a downward-sloping demand curve, and the elasticity is such that TR is maximized or constant. A more common interpretation related to a horizontal TR curve is that MR is zero, leading to TR being at its maximum. If the TR curve itself is horizontal, it means MR is zero. A downward-sloping demand curve with constant elasticity where TR is constant is not standard. The provided source seems to have a contradiction or an unusual interpretation here. Typically, a horizontal TR curve is not depicted. If MR is zero, TR is at its maximum. If the demand curve is downward sloping, AR falls as Q increases. The provided solution text states: "If the total revenue curve is a horizontal line, then the demand curve or average revenue curve will be downward sloping. Firms can increase their volume by decreasing the price i.e., AR falls with increase in sales." This implies that the TR curve is not horizontal but rather the AR curve is downward sloping. If the AR curve is downward sloping, the TR curve will initially rise and then fall. A horizontal TR curve is not standard for a downward sloping demand curve. The diagram shows a downward sloping demand curve (AR) and a horizontal line labeled 'P' which is confusingly placed. Assuming the intent was to describe a downward sloping demand curve:

   Price † (Rs) AR Quantity (Units)

Solution: We need to calculate Total Revenue (TR), Average Revenue (AR), and Price Elasticity of Demand (Ed) using the given schedule of Quantity (Q) and Marginal Revenue (MR).

Calculations:

• Total Revenue (TR): TR is the cumulative sum of Marginal Revenue (MR). TR_n = MR₁ + MR₂ + ... + MR_n.
• Average Revenue (AR): AR is calculated as TR divided by Quantity (Q). AR = TR / Q. In a market with a single price for all units sold, AR is equivalent to the price (P).
• Price Elasticity of Demand (Ed): We can calculate Ed using the formula $Ed\; =\; \backslash frac\{\backslash Delta\; Q\}\{\backslash Delta\; P\}\; \backslash times\; \backslash frac\{P\}\{Q\}$ or by observing the relationship between AR and MR. Since AR represents the price (P), we can use the values of AR and the change in quantity and price. The source uses a formula that seems to imply changes in P and Q derived from the AR values. Let's reconstruct the table with the calculations.

  The provided table has some inconsistencies in the MR values for quantities 3, 4, and 5 (all are 2). Let's proceed with the given values.

Calculated Schedule:

Quantity (Q)	Marginal Revenue (MR)	Total Revenue (TR)	Average Revenue (AR = TR/Q)	Price Elasticity of Demand (Ed)
1	10	10	$10\; /\; 1\; =\; 10$	-
2	6	$10\; +\; 6\; =\; 16$	$16\; /\; 2\; =\; 8$	$\backslash left|\; \backslash frac\{1\}\{1\}\; \backslash times\; \backslash frac\{8\}\{2\}\; \backslash right|\; =\; 4$ (Using P=10, Q=1 and P=8, Q=2)
3	2	$16\; +\; 2\; =\; 18$	$18\; /\; 3\; =\; 6$	$\backslash left|\; \backslash frac\{1\}\{2\}\; \backslash times\; \backslash frac\{6\}\{3\}\; \backslash right|\; =\; 1$ (Using P=8, Q=2 and P=6, Q=3)
4	2	$18\; +\; 2\; =\; 20$	$20\; /\; 4\; =\; 5$	$\backslash left|\; \backslash frac\{1\}\{1\}\; \backslash times\; \backslash frac\{5\}\{4\}\; \backslash right|\; =\; 1.25$ (Using P=6, Q=3 and P=5, Q=4)
5	2	$20\; +\; 2\; =\; 22$	$22\; /\; 5\; =\; 4.4$	$\backslash left|\; \backslash frac\{1\}\{0.6\}\; \backslash times\; \backslash frac\{4.4\}\{5\}\; \backslash right|\; \backslash approx\; 1.47$ (Using P=5, Q=4 and P=4.4, Q=5)
6	0	$22\; +\; 0\; =\; 22$	$22\; /\; 6\; \backslash approx\; 3.67$	$\backslash left|\; \backslash frac\{1\}\{0.73\}\; \backslash times\; \backslash frac\{3.67\}\{6\}\; \backslash right|\; \backslash approx\; 0.83$ (Using P=4.4, Q=5 and P=3.67, Q=6)
7	0	$22\; +\; 0\; =\; 22$	$22\; /\; 7\; \backslash approx\; 3.14$	-
8	0	$22\; +\; 0\; =\; 22$	$22\; /\; 8\; =\; 2.75$	-
9	-5	$22\; -\; 5\; =\; 17$	$17\; /\; 9\; \backslash approx\; 1.89$	-

Note: The calculation for Price Elasticity of Demand (Ed) in the original source appears to use a specific method or formula that is not fully detailed or consistently applied across all rows. The values provided in the source for Ed are also inconsistent with standard calculations based on the AR values. The reconstructed table shows the standard calculations for TR and AR. The Ed calculations here are based on the arc elasticity formula using consecutive points, and the source's values differ significantly, suggesting a potential error or a different method used in the source.