The firm's profitt maximising decision is to set their quantity such that MR = MC. To find the highest price that we can charge for that quantity we look up to the demand curve. Does that help?
@@econhelp_official Yeah ty, I am self studying A-Level economics (the qualification here in the UK) and it is a bit difficult to know which order to study it in, do you have any recommendations for the foundations?
@@BBK583 I don't know much about A-Levels, but I would go through the topics in the order that the text book presents the material. Read the material carefully and slowly. Work hard and don't give up. 👍
I'm a bit confused and have looked at several videos but it doesn't click in my brain, since I might be overthinkking it. What's the difference between demand, supply curve and marginal revenue curve? Why can't sellers sell at the demand/supply curve? why is the marginal revenue curve needed? I remeber it being to sell until MB=MC but why MR=MC???
Hi! 1) The demand curve shows the relationship (in a whole market or for an individual) between the quantity demanded (q_d) and the price of the good (P). 2) The supply curve shows the relationship between the quantity supplied (q_s) and the price of a good (P). 3) The Marginal Revenue curve (MR) shows the additional revenue that a firm would get if they produced one more unit. 4) Yes, in economics we should only do something if benefits are higher than the costs, and we exhaust all possibilities where this happens we get to the equality. The proper way to do this is to think at the margin, so this reduces to MB=MC. When we think about this for firms, the benefit is the additional revenue, so this is where MR = MC. 5) In perfect competition (not in monopoly), the market ends up producing where MB = MC. This is as a result of the price mechanism, so we produce where Quantity Supplied (Qs) = Quantity Demanded (Qd). Demand actually tracks MB, and supply actually tracks MC. This is why perfectly competitive markets (thus described, so no extenalities ect) are deemed efficient. I feel that one big confusion for you is differentiating between our model of perfect competition and our model of monopoly. Does that help? There are a few videos I have sone on some of this stuff and I can direct you to those, but I haven't done videos on all of this stuff. Also sorry about the late reply, I was out of town for my brother's birthday.
