Concepts of Revenue
It is the sale receipts or money receipts from the sale of a commodity.
Total Revenue
It refers to money receipts of a firm from the sale of its total output. It is estimated as this: \[TR=P \text{ (Price)} \times Q \text{ (Quantity)}\] Example :
If 5 pens are sold at the rate of ₹10 per unit, then total revenue of the firm will be: \[\text{Output} \times \text{Price} = \text{Total Revenue} \\
5\ \times ₹10 =\ ₹50\]
Marginal Revenue
It is an addition to the total revenue when an additional unity of output is sold. It can be written as: \[MR=TR_n-TR_{n-1}\] Here,
\(MR\) = Marginal Revenue
\(TR_n\) = Total Revenue of ‘n’ units of output
\(TR_{n-1}\) = Total Revenue of ‘n-1’ units of output
\[\sum{MR}=TR\] OR \[MR=\frac{\Delta{TR}}{\Delta{Q}}\]
Average Revenue
Average Revenue is the per unit revenue received from the sale of a commodity. It is also known as price.
\[AR= \frac{TR}{Q}\] or, \[AR=\frac{P \cdot Q}{Q}\] or, \[AR=P\]