Econometrics And Econometricians December 01, 2021

Revenue curves under Different markets

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Broadly markets are of three types as follows: 1. Perfectly competitive market 2.Monopoly market 3.Monopolistic competitive market 1.Revenue curve under perfectly competitive market or Perfect competition: Under perfect competition, a firm is a price taker. It cannot influence /change the market price. AR and MR curve 2. Revenue Curve Under Monopoly: A monopolist is a price maker. He is the single seller of the product in the market. Under monopoly, however, if a firm desires to sell more , he has to reduce price of the product. Thus, there is  negative relationship  between price of the product na ddemand for the product in a monopoly market. Accordingly, a Firm’s AR curve (or the demand curve or the priice line) slopes downaward.  3. Revenue Curve Under Monopolistic Competition: In a Monopolistic Competitive market, producers sell “differentiated product” which means products whose close substitutes are easily available in the market. Under Monopolistic Compet...
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Movement Along the Demand Curve and Shift in Demand Curve

 

Movement along the Demand Curve and Shift in Demand Curve: The Difference

Movement along the Demand Curve

Shift in Demand Curve

Extension of Demand refers to all such situations when change in demand is related to change in own price of the commodity. It is also called change in quantity demanded.

Shift in Demand refers to all such situations when change in demand is related to factors other than own price of the commodity. It is also called “change in demand.”

Other determinants of demand (other than own price of the commodity) are assumed as constant.

Own price of the commodity is assumed as constant while any of the other determinants of demand changes

Diagrammatically it is shown as a downward or upward along the same demand curve.

Diagrammatically it is shown as a forward or backward shift in demand curve.

Extension of Demand and Increase in Demand: The Difference

Extension of Demand

Increase in Demand

Extensions of demand refers to increase in quantity demanded due to decrease in own price of the commodity. 

Increase in demand refers to increase in quantity demanded when own price of the commodity is constant.  

It is studied on the assumption that other determinants of demand (other than own price of the commodity) are constant. 

It is studied on the assumption that own price of the commodity is constant. 

It leads to downward movement along the same demand curve from left to right.

It leads to forward shift in demand curve.

Contraction of Demand and Decrease in Demand: The Difference

Contraction of Demand

Decrease in Demand

Contraction of demand refers to decrease in quantity demanded due to increase in own price of the commodity.

Decrease in the demand refers to decrease in quantity demanded even when own price of the commodity is constant.

It is studied on the assumption that other determinants of demand (other than own price of the commodity) are constant. 

It is studied on the assumption that own price of the commodity is constant. 

It leads to upward movement along the same demand curve from right to right.

It leads to backward shift in demand curve. 


Causes/situations when demand curve shift forward

(i)   When income of the consumer increases

(ii)  When price of the substitute good increases

(iii) When price of the complementary good decreases

(iv) When tastes/preferences of the consumer shifts in favor of the commodity (due to change in fashion/ climate)

(v)  When availability of the commodity is expected to reduce in the near future 


Causes/situations when demand curve shift backward 

(i)   When income of the consumer decreases

(ii)  When price of the substitute good decreases

(iii) When price of the complementary good increases

(iv) When tastes/preferences of the consumer shifts against the commodity (due to change in fashion/ climate)

(v) When availability of the commodity is expected to rise in the near future 

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