Class 11 Micro Economics Notes · CBSE
Revenue Curves under Imperfect Competition
Revenue Curves under Imperfect Competition — understanding downward-sloping AR and MR curves and the monopoly versus monopolistic competition difference. CBSE Class 11 Microeconomics notes with graphs and practice problems.
Last updated: 12 Sep 2026
Notes
When Price Falls with Rise in Output
When firms can increase sales only by decreasing the price, then AR falls with an increase in sale. Revenue from every additional unit (MR) will be less than AR.
AR and MR Curves Slope Downwards
Both AR and MR curves slope downwards. MR falls faster than AR — the MR curve is steeper.
MR is limited to one unit, whereas AR is derived by all the units. This leads to a lesser fall in AR than in MR.
The MR curve can be zero and negative, while AR remains positive.
MR can fall to zero and can even become negative. However, AR can be neither zero nor negative as TR is always positive.
| Units sold | AR (₹) | TR (₹) | MR (₹) |
|---|---|---|---|
| 1 | 5 | 5 | 5 |
| 2 | 4 | 8 | 3 |
| 3 | 3 | 9 | 1 |
| 4 | 2.25 | 9 | 0 |
| 5 | 1 | 5 | −4 |
Monopoly vs Monopolistic Competition
| Aspect | Monopoly | Monopolistic Competition |
|---|---|---|
| Close substitutes | Absent | Present |
| Elasticity of AR and MR curves | Less elastic — steeper curves | More elastic — flatter curves |
| Effect of a price increase on demand | Proportionately smaller fall in demand | Proportionately larger fall in demand |
Monopoly — Steep curves
Monopolistic Competition — Flatter curves
Key Takeaways
Key Takeaways
- Under imperfect competition, AR and MR curves slope downwards — more output can only be sold at a lower price.
- MR falls faster than AR — the MR curve is steeper.
- MR can become zero or negative while AR remains positive.
- Under monopolistic competition, AR and MR are more elastic (flatter) than under monopoly due to close substitutes.