Explain the concept of revenue

Question

Explain the concept of revenue.

Answer 1

For the purpose of demand analysis, this is considered helpful to differentiate between different types of revenue as follows:

Average Revenue (AR):

Average Revenue means the whole receipts from sales divided with the number of unit sold.

AR= TR/Q

Total Revenue (TR):

Total Revenue means the whole sales proceeds. This can be ascertained with multiplying quantity sold through price.

TR =P x Q

Incremental Revenue (IR):

Incremental Revenue measures then differences among the new TR and existing TR

IR=R2-R1 =?R

Marginal Revenue (MR);

This is the additional revenue that would be earned by selling an additional unit of a products firm. This demonstrates the change in TR while one more or one less unit is sold.

MR= R2-R1/Q2-Q1 = ?R/?Q

Here, R1= Total Revenue before price change
R2= Total Revenue after price change
Q1 = old quantity before price change
Q2 = new quantity after price change.