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Production and cost — Economics STD 11 Commerce — Question

CBSE BoardEnglish MediumSTD 11 CommerceEconomicsProduction and cost3 Marks
Question
'Average Revenue curve represents Law of Demand'. Discuss.
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Answer

Average Revenue is determined by dividing Total Revenue by the quantity sold which indicates price of the commodity. Hence, Average Revenue curve shows the relationship between price of a commodity and quantity demanded. It is downward sloping curve because to increase its sales, firms have to lower their prices. So, it possesses all the characteristics of the demand curve. Therefore, we can say that Average Revenue curve represents Law of Demand.

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