thank you sir for this video.it is so well explained with proper diagrams and labelling that i finally understood the concept after going through so many books and other youtube videos
The MC curve does not have to cross the vertical portion of the MR curve. What these curves demonstrate is that if the MC curve crosses the MR curve at that point, then modest changes (shifts) in MC do not necessarily lead to a change in output and price. This is unlike perfect competition and monopolies where any changes in MC lead to a change in output and price.
well explained sir, thank you, but there's one thing I don't understand ... in the point, the kink, in this place the function is not differentiable ... so actually no defined marginal revenue ... so how can we possibly say MR = MC there? ...
This is why it is called the MR gap (the two MR curves have a vertical gap). If you have the MC curve cross the bottom tip of the upper MR curve then you have MR=MC. If you then shift the curve downward (into the gap) there will be no change in P or Q. The same thing happens when you have the MC curve crossing the upper tip of the bottom MR curve and then shifting the MC curve upward (again, into the MR gap). So, if you imaging a vertical line that connects the two MR curves then one could say that MR=MC. This is very difficult to explain without visuals.
I understand you, even without visuals. But, mathematically, we have a problem here ... normally, in other cases (like monopoly or perfect competition etc) we can get the MR curve or its formula, but now it's mathematically undefined , it's a bit the same like saying 1 divided by 0 = undefined BUT we still will say it's for example 15 dollar because the MC = 15 dollar ..
thank you sir for this video.it is so well explained with proper diagrams and labelling that i finally understood the concept after going through so many books and other youtube videos
You are welcome!
Thank you for that explanation mr , but I need to understand why marginal cost is passing through the broken part of the marginal revenue
The MC curve does not have to cross the vertical portion of the MR curve. What these curves demonstrate is that if the MC curve crosses the MR curve at that point, then modest changes (shifts) in MC do not necessarily lead to a change in output and price. This is unlike perfect competition and monopolies where any changes in MC lead to a change in output and price.
well explained sir, thank you, but there's one thing I don't understand ... in the point, the kink, in this place the function is not differentiable ... so actually no defined marginal revenue ... so how can we possibly say MR = MC there? ...
This is why it is called the MR gap (the two MR curves have a vertical gap). If you have the MC curve cross the bottom tip of the upper MR curve then you have MR=MC. If you then shift the curve downward (into the gap) there will be no change in P or Q. The same thing happens when you have the MC curve crossing the upper tip of the bottom MR curve and then shifting the MC curve upward (again, into the MR gap). So, if you imaging a vertical line that connects the two MR curves then one could say that MR=MC. This is very difficult to explain without visuals.
I understand you, even without visuals. But, mathematically, we have a problem here ... normally, in other cases (like monopoly or perfect competition etc) we can get the MR curve or its formula, but now it's mathematically undefined , it's a bit the same like saying 1 divided by 0 = undefined BUT we still will say it's for example 15 dollar because the MC = 15 dollar ..