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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Concept of Cost

 For producing output, inputs are required. Broadly, there are two types of inputs:

(i) Factor inputs such as land, Labour, capital and entrepreneurship.

(ii) Non-factor Inputs such as raw material, transportation.    

Cost: (Definition): Cost refers to the expenditure incurred by a producer (explicitly or implicitly) on the factor as well as non-factor inputs for a given output of commodity.

Explicit Cost: Expenditure incurred by a producer on the purchase of inputs from the market is called explicit cost. Example: expenditure on factor inputs and non-factor Inputs bought from the market.  

Implicit Cost: Estimated expenditure on the use of self-owned inputs is called implicit cost.

Total Cost= Explicit cost + Implicit cost

Selling Cost and Production Cost

Selling Cost: Selling cost refers to the expenditure incurred by the producer to promote sale of the commodity. Example: expenditure on advertisements etc. 

Production Cost: Production cost refers to the expenditure incurred (explicitly or implicitly) on the inputs for producing a given level of output. 

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