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THE LAW OF DEMAND, POSITIVE SLOPING MARGINAL REVENUE, AND MULTIPLE PROFIT EQUILIBRIA

John P. Formby, Stephen K. Layson, William J. Smith

Open publisher page 35 citations

Abstract

This paper demonstrates that the conditions for a positively sloping marginal revenue curve are much less stringent than is generally recognized. Simple transformations of any well-behaved convex demand function can easily result in a demand for which marginal revenue is positively sloping. For this reason, positively sloping marginal revenue functions must be considered whenever convex demand functions are analyzed. The existence of positively sloping marginal revenue makes multiple profit equilibria for the firm a very real possibility.

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What this paper is about

This paper demonstrates that the conditions for a positively sloping marginal revenue curve are much less stringent than is generally recognized. Simple transformations of any well-behaved convex demand function can easily result in a demand for which marginal revenue is positively sloping. For this reason, positively sloping marginal revenue functions must be considered whenever convex demand functions are analyzed. The existence of positively sloping marginal revenue makes multiple profit equilibria for the firm a very real possibility.

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OpenAlex reports 35 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

This paper demonstrates that the conditions for a positively sloping marginal revenue curve are much less stringent than is generally recognized. Simple transformations of any well-behaved convex demand function can easily result in a demand for which marginal revenue is positively sloping. For this reason, positively sloping marginal revenue functions must be considered whenever convex demand functions are analyzed. The existence of positively sloping marginal revenue makes multiple profit equilibria for the firm a very real possibility.

Key concepts: Marginal revenue, Marginal profit, Revenue, Economics, Demand curve, Marginal utility, Profit (economics), Microeconomics

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