Revenue Theory

What is revenue?

Revenue is the income derived by a firm from selling its products, over a period of time.

Total revenue (TR)

Total revenue is the total receipts of a firm from the sale of any given quantity of output.

It can be calculated as the selling price of the firm's product times the quantity sold, i.e. total revenue = price × quantity

Average revenue

Average revenue is the total revenue divided by total quantity sold.

AR=TR/Q(in units)

Marginal Revenue

Marginal revenue (MR) is the amount of extra revenue which is generated by selling one more unit of a product in a given time period.

MR=Change in TR/Change in quantity