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Producer Equilibrium Class 11 Notes

The document discusses the concept of profit and producer's equilibrium, highlighting that profit is the excess of sales receipts over production costs. It outlines two methods for determining producer equilibrium: the TR-TC approach and the MR-MC approach, particularly under perfect competition where price is constant. The equilibrium is achieved when marginal cost equals marginal revenue, with the optimal output level identified as 5 units.

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2K views4 pages

Producer Equilibrium Class 11 Notes

The document discusses the concept of profit and producer's equilibrium, highlighting that profit is the excess of sales receipts over production costs. It outlines two methods for determining producer equilibrium: the TR-TC approach and the MR-MC approach, particularly under perfect competition where price is constant. The equilibrium is achieved when marginal cost equals marginal revenue, with the optimal output level identified as 5 units.

Uploaded by

abhaykanpurlycos
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

By : Akash Srivastava you tube : Infinite study

Producer
Equilibrium Class
11 Notes
Profit
Profit refers to the excess of receipts from the sale
of goods over the expenditure incurred in
producing them.
Producer’s Equilibrium
It refers to that price & output combination which
brings maximum profit to the producers & profit
declines as more is produced.
There are 2 methods for the determination of
producer equilibrium:
1) TR-TC Approach
2) MR-MC Approach
MR-MC Approach Under Perfect Competition

"“If you want to shine like a sun, first burn like a sun.” Dr. APJ Abdul Kalam"
By : Akash Srivastava you tube : Infinite study

Under perfect competition price is determined by


the industry & firm is the taker of that price. The
price remains the same.
According to this approach, the producer’s
equilibrium refers to the stage of that output level
where:
a) MC = MR
b) MC > MR, after MC = MR
Output Price TR TC MR MC

1 12 12 13 12 13

2 12 24 25 12 12

3 12 36 34 12 9

4 12 48 42 12 8

5 12 60 54 12 12

6 12 72 68 12 14

"“If you want to shine like a sun, first burn like a sun.” Dr. APJ Abdul Kalam"
By : Akash Srivastava you tube : Infinite study

MR-MC Schedule (Perfect Competition)MR-MC


Schedule when the price is constant

Explanation:
• When the price remains constant, firms can
sell any quantity of output at a price fixed by
the market.

"“If you want to shine like a sun, first burn like a sun.” Dr. APJ Abdul Kalam"
By : Akash Srivastava you tube : Infinite study

• Price remains the same at all the levels of


output, also MR = AR.
• Hence, the AR curve is similar to the MR
curve.
• The producer’s equilibrium will be determined
at the OQ level of output because at this point
both the conditions are satisfied i.e.
a) MC = MR
b) MC > MR after MC = MR
• Although MC = MR is also satisfied at point A
it is not the point of equilibrium because at
this point only the first condition is satisfied
(MC=MR).
• Hence, the producer’s equilibrium will be
achieved at 5 units of output.

"“If you want to shine like a sun, first burn like a sun.” Dr. APJ Abdul Kalam"

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