How do u find marginal revenue?

1 Answer
Oct 31, 2015

Answer:

Marginal Revenue is the difference between present total revenue and the previous total revenue. It is an addition made to the total revenue.

Explanation:

Marginal Revenue is the additional revenue made to the total revenue from the sale of one more unit of a good.

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When the sale increase from 2 units to 3 units. The TR increases from $.36 to $.48. The additional revenue made to the total revenue is $.12. MR of the 3rd unit is $.12.

The Formula to calculate MR is -

#MR_n =TR_n -TR_(n-1)#
#MR_3 =TR_3 -TR_(3-1)#
#MR_3 =TR_3 -TR_2#
#MR_3 =48 -36=12#

There is another formula also -

#MR =( Delta(TR))/(DeltaQ)#

When the sales moves from 4 units to 5 units #DeltaQ = 1#, and #Delta TR= (60-56) = 4#

MR of the 5th unit is #MR =4/1=4#