What is the mathematical formula for how marginal revenue changes with quantity sold?
Note in practice quantity increments in discrete numbers so:
In real life here is what you may see:
- Total Revenue = (Current Price Per Product) x (Current Number Products Sold)
#=>TR_1 = P_1xxQ_1#
- Consider lower Alternate Price and determine Alternate Number Products Sold at this price. This step may require specific market analysis.
- Alt Revenue = (Alt Price) x (Alternative Products Sold)
#=>TR_2 = P_2xxQ_2#
- Marginal Revenue,
#MR = |(TR_1-TR_2)/(Q_1 - Q_2)|#
The total revenue (TR) received from the sale of Q goods at price P is given by
Marginal revenue is the derivative of total revenue with respect to demand.