3.3.1 - revenue

Question 1

what is the formula for total revenue?

Answer 1

total revenue = price x quantity
TR = P x Q

Question 2

what is the formula for average revenue?

Answer 2

average revenue = total revenue / quantity
AR = TR / Q = (PxQ) / Q = P
Average Revenue = D = P (the price line), downward sloping demand curve only

Question 3

what is the formula for marginal revenue?

Answer 3

marginal revenue = change in total revenue / change in quantity
the additional revenue from the sale of an extra unit (rate of change = gradient of TR)