Concept of revenue

  1. Total revenue (TR):
    It refers to the total amount of income received by a firm by selling the total number of output. It is obtained by multiplying the per unit price of commodity with total number of quantity of output sold in market.

    Total revenue = Price per unit × Total quantity of output sold
    Or, TR = P × Q

  2. Average revenue (AR):
    Average revenue refers to the revenue earned per unit of output sold. It is obtained by dividing the total revenue by total quantity of output sold.

    Average revenue = total revenue (TR) / total quantity sold (Q)
    Or, AR = TR /Q
    = (P × Q) / Q
    = Q
    AR = P =Demand

  3. Marginal revenue (MR):
    Marginal revenue refers to the change in total revenue sue to the change in an additional unit of output sold.

    MR = ∆TR / ∆Q
    MR = marginal revenue
    ∆TR = change in total revenue
    ∆Q = change in quantity of output sold