Unit 3 Edexcel - Revenues

Full Revision notes on Revenues for A2 Economics Unit 3 Edexcel

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Harry Bindloss
Objectives of firms
All firms want to profit maximise
Economists have 2 different profits
1. Normal profit: The entrepreneur receives the minimum amount of profit to keep
him/her in business. If there is less he/she will change industries or place resources into
another venture or become an employee. Therefore normal profit can be seen as the
wages of the entrepreneur.
Normal profit = TR = TC
2. Supernormal profit: Extra profit above that level of normal profit. Supernormal profit
occurs where AR>ATC. Supernormal profit is also known as abnormal profit. Abnormal
profit means there is an incentive for other firms to enter the industry (if they can)
Price Makers and Takers
Price Maker
Q1 ­ This would be good as MR is greater than MC however quantity is not as high. Anything

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Harry Bindloss
Price Taker
Total Revenue = Quantity sold x price
Average Revenue = Total revenue/Quantity
Marginal Revenue = Revenue generated by each extra unit
Revenue for the Price taker
All firms in that particular market cannot set a price and they are all at the same level so
there is no dominant business.…read more

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Harry Bindloss
Revenue for Price Makers
Price Maker ­ Firms can influence the market. Could be due to a sole supplier or a unique
product. Therefore this firm has an influence over the price. It will have a downwards sloping
demand curve.…read more


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