To calculate marginal revenue, divide the change in total revenue (CTR) by the change in quantity (CIQ).
The Marginal Revenue Calculator is quite handy in calculating the additional revenue generated from the sale of one more unit of a good or service. In essence, marginal revenue is an important concept in economics.
Because, it helps businesses understand how much extra income they can expect from increasing production. For example, if a company is considering expanding output, understanding the marginal revenue can help assess whether the increase in sales will cover the cost of production and generate additional profit.
Formula
| Variable | Description |
|---|---|
| MR | Marginal Revenue |
| CTR | Change in Total Revenue |
| CIQ | Change in Quantity |
Solved Calculations
Example 1:
For instance, if the total revenue increases from $1,000 to $1,200 when production rises from 100 to 120 units, the marginal revenue is calculated as:
| Step | Calculation |
|---|---|
| Change in Total Revenue (CTR) | $1,200 – $1,000 = $200 |
| Change in Quantity (CIQ) | 120 – 100 = 20 |
| MR Calculation | |
| Result | $10 per unit |
Answer: The marginal revenue is $10 per unit.
Example 2:
Similarly, if the total revenue increases from $2,000 to $2,500 with a rise in production from 200 to 250 units, the marginal revenue is:
| Step | Calculation |
|---|---|
| Change in Total Revenue (CTR) | $2,500 – $2,000 = $500 |
| Change in Quantity (CIQ) | 250 – 200 = 50 |
| MR Calculation | |
| Result | $10 per unit |
Answer: The marginal revenue is $10 per unit.
What is a Marginal Revenue Calculator?
The Marginal Revenue Calculator is an economics-related tool. One can use it to calculate the additional revenue generated from selling one more unit of a product or service. In economics, marginal revenue is an important concept for businesses looking to maximize profits.
More importantly, it helps companies understand the change in total revenue when output increases by one unit, which can guide pricing and production decisions.
To use this calculator, you typically input the total revenue at two different output levels. The calculator then calculates the change in revenue and divides it by the change in output to determine the marginal revenue.
This is especially useful in determining optimal production levels and assessing whether increasing or decreasing production would be profitable.
Final Words:
To summarize, the Marginal Revenue Calculator is an essential tool for businesses seeking to optimize their revenue. By providing accurate calculations, it allows companies to make informed decisions about production and pricing strategies.
