Free Marginal Revenue Calculator
Marginal Revenue Calculator
Marginal Revenue (MR) is the additional revenue generated by selling one more unit of a good or service.
Formula: MR = ΔTotal Revenue / ΔQuantity
Understanding Marginal Revenue:
What Is Marginal Revenue?
Marginal Revenue (MR) is the additional income a business earns from selling one more unit of a product or service. It helps companies determine the financial impact of increasing production and sales.
Why Is Marginal Revenue Important?
- Pricing Strategy – Helps businesses decide whether lowering prices to sell more units will increase overall revenue.
- Profit Maximization – Firms use MR to find the optimal production level where profits are highest.
- Competitive Analysis – Comparing MR with Marginal Cost (MC) helps determine if producing more is profitable.
How to Calculate Marginal Revenue
The formula for Marginal Revenue is simple:
[
\text{Marginal Revenue (MR)} = \frac{\Delta \text{Total Revenue}}{\Delta \text{Quantity Sold}}
]
Where:
- ΔTotal Revenue = Change in total revenue (e.g., from selling additional units)
- ΔQuantity Sold = Change in the number of units sold
Example Calculation
Suppose a company sells:
- 10 units at $50 each → Total Revenue = $500
- 11 units at $49 each → Total Revenue = $539
Change in Revenue (ΔTR) = $539 – $500 = $39
Change in Quantity (ΔQ) = 11 – 10 = 1
[
MR = \frac{39}{1} = \$39
]
This means selling the 11th unit adds $39 to total revenue.
How Businesses Use Marginal Revenue
1. Profit Maximization (MR = MC Rule)
- Businesses maximize profit when Marginal Revenue = Marginal Cost (MR = MC).
- If MR > MC, producing more increases profit.
- If MR < MC, producing more reduces profit.
2. Pricing Decisions
- If MR is declining, a business may need to adjust prices to maintain profitability.
- Helps decide whether bulk discounts or premium pricing is better.
3. Market Expansion
- If MR remains high, expanding production could be beneficial.
- If MR is low or negative, increasing sales may not be worth it.
Try Our Marginal Revenue Calculator
Use the calculator above to quickly determine how selling additional units affects your revenue. Simply enter:
- Change in Total Revenue (how much extra money you made)
- Change in Quantity Sold (how many more units you sold)
The tool will instantly compute your Marginal Revenue, helping you make smarter business decisions.
Final Thoughts
Understanding Marginal Revenue is crucial for optimizing sales, pricing, and production. By tracking MR, businesses can:
Increase profitability by adjusting output
Set competitive prices without losing revenue
Avoid overproduction when MR drops below costs
Use our Marginal Revenue Calculator to analyze your sales strategy and maximize earnings!
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