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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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- Fall '10
- Marginal concepts, marginal value, average quantity, marginal quantity