DARP (Demand, Average Revenue, Price)

Definition

DARP is an acronym that represents the relationship between demand, average revenue, and price in microeconomics. Demand refers to the quantity of a good or service that consumers are willing and able to buy at a given price. Average revenue is the total revenue divided by the quantity sold, while price is the amount of money charged for a product or service.

Analogy

Think of DARP as a dance routine where demand leads the way, average revenue sets the rhythm, and price determines the steps. Just like in a dance routine, these three elements work together to create harmony in the market.

Related terms

Elasticity of Demand: This term refers to how responsive consumers are to changes in price. It measures how much quantity demanded changes when there is a change in price.

Total Revenue: Total revenue is calculated by multiplying the quantity sold by the price per unit. It represents the total income received from selling goods or services.

Market Equilibrium: Market equilibrium occurs when supply and demand are balanced, resulting in an optimal allocation of resources and no tendency for prices or quantities to change over time.