What is Marginal Revenue?
Marginal Revenue (MR) is a crucial concept in microeconomics that measures the additional revenue generated from selling one more unit of a product or service. Understanding MR is fundamental for businesses to make optimal decisions about pricing and production levels to maximize their profits. This guide breaks down the formula, its applications, and common pitfalls.
How to Calculate Marginal Revenue
The formula is the change in total revenue divided by the change in quantity sold.
MR = ΔTR / ΔQ
Where ΔTR = Change in Total Revenue, and ΔQ = Change in Quantity Sold