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THE LAW OF DEMAND, POSITIVE SLOPING MARGINAL REVENUE, AND MULTIPLE PROFIT EQUILIBRIA
Author(s) -
FORMBY JOHN P.,
LAYSON STEPHEN,
SMITH W. JAMES
Publication year - 1982
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1982.tb01158.x
Subject(s) - marginal revenue , marginal profit , revenue , economics , demand curve , marginal utility , profit (economics) , microeconomics , marginal cost , regular polygon , mathematical economics , econometrics , mathematics , finance , geometry
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.