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Marginal Revenue (MR) : Livin Varghese P19129 PGDM A

Marginal revenue (MR) is the change in total revenue from selling an extra unit of goods. It is calculated as the change in total revenue (ΔTR) divided by the change in quantity (ΔQ). Total revenue (TR) is the total amount of money received from sales and is equal to price (P) multiplied by quantity (Q) for single pricing. Average revenue (AR) is total revenue divided by units sold, which is equal to price under single pricing. The area under the MR curve above the horizontal axis represents total revenue, and TR equals AR multiplied by Q. The slope of the MR curve is twice the slope of the AR curve.

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23 views

Marginal Revenue (MR) : Livin Varghese P19129 PGDM A

Marginal revenue (MR) is the change in total revenue from selling an extra unit of goods. It is calculated as the change in total revenue (ΔTR) divided by the change in quantity (ΔQ). Total revenue (TR) is the total amount of money received from sales and is equal to price (P) multiplied by quantity (Q) for single pricing. Average revenue (AR) is total revenue divided by units sold, which is equal to price under single pricing. The area under the MR curve above the horizontal axis represents total revenue, and TR equals AR multiplied by Q. The slope of the MR curve is twice the slope of the AR curve.

Uploaded by

Livin Varghese
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Marginal revenue ( MR )

LIVIN VARGHESE
P19129
PGDM A
 Eachseller has sufficient market
power to set the selling price higher
and sell less or set the selling price
lower and sell more.
Total revenue ( TR )
 Total revenue ( TR ) is the total amount of
money(or some other good) that a firm
receives from the sale of its goods. It the firm
practices single pricing rather than price
discrimination, TR = total expenditure of the
consumer = P x Q
Average revenue ( AR )
 Average revenue ( AR ) is the total amount of
money(or some other good) that a firm
receives from the sale divided by the number
of units of goods sold.
 AR = TR/Q, since TR=P x Q, then AR = P for

single pricing practice


Marginal revenue ( MR )
 Marginal revenue ( MR ) is the change in total
revenue resulting from selling an extra unit of
goods.
 MR = TR/Q, where TR = change in TR

due to change in Q, Q = change in Q


 For a certain known quantity transacted, the area under the MR and
above the horizontal axis is the T R .
 (I.e. the sum of the Marginal Revenues of all units of goods, I.e. area
0ACQ)
 Also, TR = AR x Q, I.e. area 0PBQ A
 The slope of MR is twice the slope of AR

B
P

0 Q MR AR
 The slope of MR is twice the slope of AR

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