Why Marginal Revenue is less than Price / Average Revenue for firms with Market Power (Monopolist)

[@Strwbbe]

finally someone who explained this concept crystal clear

[@econhelp_official]

I’m so glad! Good luck with your studies!

[@Strwbbe]

@@econhelp_official thank u !

[@sumitparanjape2758]

Underrated channel, i am a teacher, thinking of how do i explain this concept better, i am going with this! Thank you

[@econhelp_official]

That means so *so* much to me (coming from another teacher!) thank you so much! You sound like a wonderful teacher, thanks for the comment and good luck :) :)

[@Vincent-ds3kc]

You explained this better than the textbook

[@econhelp_official]

Thank you! That makes me feel very proud ☺️

[@ThuPham-dw7qt]

My team is going to present about monopoly next week and we were still struggling in explaning why MR < P lol. Your video helps a lot! Many thanks 💕 Edit: your voice is so cute awww

[@econhelp_official]

Aw cool! Good luck with your presentation I’m sure you guys will do great!! ❤️

[@Slitherpy]

Thank you, very insightful and easy to understand

[@econhelp_official]

So glad to help! Thanks 🙏 so much for your comments!

[@rayhanhussain1739]

Great video, definitely helped me for my exam

[@econhelp_official]

So glad it helped! Thanks for the comment and good luck with your studies!

[@JupiterA2721]

This is so detailed and thank you so much!

[@banguyenvan5322]

Veryhelpful. You just save my mid-term, thank you

[@econhelp_official]

Great to hear! Good luck with your exam!

[@zarirtyseer6467]

Awesome explaination....u truly r an exam saver.....CHEERS!!!

[@econhelp_official]

You’re welcome! Good luck with your exam!

[@benanstis6208]

Great explanation. Thanks

[@econhelp_official]

Glad it was helpful! Thanks for the comment!

[@matthewparker4927]

Thanks! Understand this concept now.

[@econhelp_official]

You're welcome! Good luck with your study!

[@bradcasper4823]

Ty, Clearly explained

[@econhelp_official]

Thank you for the comment! So glad the video helped!

[@hatrang5143]

thank you so much for thissss

[@econhelp_official]

Welcome! 🥰

[@ajaynaik5540]

Hey! There it did help but what if we first sell the initial 4 units at 6 and when those units are sold then sell the another one for 5, we can actually increase TR as now the supply is very low so we can even charge higher. Please help me with this enigma

[@econhelp_official]

Yes, you could do that, and it's a good idea to do this if you could identify the willingness to pay for each customer and segment them in such a way to isolate those who would pay more than $5 from those who would not. This is what we call price discrimination (charging more than 1 price). When we say that MR < price, we implicitly mean for firms who only charge one price. You will probably learn about price discrimination in your course, it's a good topic.

[@econhelp_official]

and I should add, when we do these problems, we are ceteris paribus, so the demand doesn't change as you suggest, if that makes sense.

[@ishikatyagi03]

Such a nice explanation!

[@econhelp_official]

Thank you @Ishika Tyagi!! Good luck with your study 📚 ❤️

[@JDWilliamsPD]

Bravo!

[@econhelp_official]

thank-you!!

[@sarielllluo]

Thank you for the video! so why is mr steeper than ar?

[@econhelp_official]

I'm not sure how to think about this is terms of slope. Here's an initial thought: what we want to explain is that the MR is not only less than AR, but increasingly so. This will give us the steeper slope. From this perspective, the answer may well be "because the price decreases": - as we increase quantity, the additional revenue we get from that additional quantity, gets smaller and smaller because the price we get for that additional unit gets smaller and smaller. Thus we get MR steeper (below our demand and increasinly the gap gets wider). Does that help? Another way to think about it is with elasticities and connecting it with the TR curve, but I'm not sure if that helps.

[@sarielllluo]

@@econhelp_official okok, thank you. From all the other videos I have watched, they have only proved it mathematically, so I was wandering if there is an actual explanation to it haha.

[@econhelp_official]

Yeah it's a good question, I hadn't thought about it in terms of the slope. I think it's really good to see this through the elasticities as well, that gets to the issue in another way. In the top half of the curve we go from perfectly elastic to unit elastic. This means that increasingly, as we decrease the price, the demand gets less responsive to changes in price (quantity does not change so dramatically given a decrease in the price). I'm pretty sure I go through that here: kzbin.info/www/bejne/q5Lam6KloN-mars... So then we link it all to the hump shaped TR curve. Another way to think about it is that MR can't ever be flatter than AR (otherwise at some point MR will become greater than AR, which we know from this video can't be true). So then the question is, why isn't it just the same slope? Well... the price is decreasing. each time we increase q, that part of MR that increases (because we sell one more unit) is getting smaller and smaller (since price decreases) so MR gets smaller more quickly (i.e. it is steep). ... I hope that makes sense, it's actually hard to articulate! :)

[@sarielllluo]

@@econhelp_official omg that was really helpful. thank you!

[@nouf1665]

Thanks a lot

[@econhelp_official]

Most welcome! Good luck with your studies!