Introduction of Revenue

Introduction of Revenue refers to the payment received by an entrepreneur from the sales of goods produced. If a producer can during a month sales 100 package of pens at the price of Rs 10 each, this total revenue during the month equal Rs 100*10= Rs 1000. According to Dooley, the revenue of a firm is its sale receipt or money receipts from the sales of a product, thus money receipts by a producer for selling the products are called revenue.

There are three types of revenue they are as follows.

• Total revenue (TR).
• Average revenue (AR).
• Marginal revenue (MR).

Total revenue (TR)

TR is the total amount of money received by the firm from the sales of the total product. It can b calculate by multiplying the units of the sales with the price. In other words, it is the sum of the MR. It is expressed as follows.

TR=P*Q
Where,
TR= Total revenue
Q= Quantity sold
P= Price per unit of commodity

For example,

Q=5, P= Rs 10
Then TR= 5*10= Rs 50.

Average revenue (AR)

The AR is the price per unit. It can be obtained by dividing the TR by the quantity sold. It can be expressed as follows.

AR=TR/Q
Where,
AR= Average revenue
TR= Total revenue
Q= Quantity sold

For example,

TR= Rs 80 and Q= 2
AR= 80/2= Rs 40

Marginal revenue (MR)

Marginal revenue is the additional revenue made by TR while selling one more unit of a commodity. It is expressed as follows.

MR= TRn-TRn-1
Where,
MR= Marginal revenue
TRn= Total revenue of n units
TRn-1= Total revenue of n-1 units

for example,

TRn=10
TRn-1=14
The MR= 10-14=4.