AR table - AR-MR Relationship table This has been...

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Unformatted text preview: AR-MR Relationship table: This has been illustrated in the table below. The table makes the MR-AR relationship clear. In part I where total quantity increases from 10 to 20 to 30 marginal quantity remains constant at 10 (20 −10 = 10, 30 - 20 = 10). Average quantity is also constant and equal to 10 (20 ÷ 2 = 10, 30 ÷ 3 = 10). When the marginal quantity increases as 10, 15, 20 though the average quantity increases it is smaller in value and is below the marginal quantity. When the marginal value falls as 10, 8, 6 the average value also tends to fall as 10, 9, 8. In this case, average value is more than and above marginal value. This has further been made clear with an arrow diagram in Figure 41. Here A the average quantity and M the marginal quantity are equal when the two are constant. When A rises, M1 is above A and when A falls, M2 is below A. This relationship is applicable to all forms of markets and for all average marginal quantities. The reason for such behavior is simple. It is Marginal Change which makes the average quantity behave one way or the other. Marginal Change is a single unit change whereas average value gets distributed over all previous units. When M increases from 10 to 15, 5 is added to M. This value is distributed over two units to produce Average Change of 5 ÷ 2 = 2.5; hence the rise from 10 to 12.5. ...
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This note was uploaded on 11/26/2011 for the course EC ec 201 taught by Professor - during the Fall '10 term at Montgomery.

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AR table - AR-MR Relationship table This has been...

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