Marginal Revenue Calculator

The marginal revenue calculator helps you to calculate the profit margin that you make by producing one additional unit of a product or service.

The Marginal Revenue:

Marginal revenue is a crucial concept in microeconomics and significant in decision-making for businesses.

The marginal revenue calculation plays a critical role in determining:

• The pricing strategies
• The production levels of products

Businesses can understand how changes in production or pricing affect their total revenue and profitability. Calculating marginal revenue makes it simple to adjust prices and the production level.

How to Calculate Marginal Revenue?

You can calculate marginal revenue by dividing the Change in Total Revenue by the change in the quantity of the products sold.

Mathematically;

Marginal Revenue (MR) = Change in Total Revenue / Change in Quantity Sold

The marginal revenue calculation is valuable in evaluating the impact of sales promotions, discounts, and other marketing strategies on overall revenue generation.

Practical Example:

Let’s calculate the marginal revenue of a company having the initial revenues are $5000 and the final revenue is $20000. The initial quantity of the production was 25 units and the final production was 100 units. Then how do I calculate marginal revenue?

Given:

Initial revenues = $5000 

Final revenue = $20000

Initial quantity = 25 units 

Final production = 100 units

Solution:

Change in Total Revenue = Final revenue - Initial revenues

Change in Total Revenue = $20000- $5000 = $15000

Change in Quantity = Final quantity - Initial quantity

Change in Quantity = 100 - 25 = 75 units

The equation for marginal revenue is:

Marginal Revenue (MR) = Change in Total Revenue / Change in Quantity Sold

Marginal Revenue (MR) = $15000/ 75 units

Marginal Revenue (MR) = $200

There lies an inverse relation between price and quantity. This makes the marginal revenue graph go down like an inverted slope as can be seen from the following picture:

The marginal revenue calculator calculus reflects the price is higher when a product is introduced in the marketplace. 

Working of Marginal Revenue Calculator:

The marginal benefit calculator requires the following values to calculate marginal revenue.

Input:

• Enter the initial and final revenues 
• Enter the initial and final production 
• Tap calculate 

Output:

• Marginal revenue 
• Change in revenue 
• Change in quantity 

FAQs:

What is the Difference Between Marginal Revenue and Average Revenue?

The marginal revenue is the change in revenue divided by the change in quantity, while the average revenue is the total revenue divided by the total number of units sold.

What is Marginal Revenue Used For?

Analyzing marginal revenue helps companies identify the revenue generated from selling an additional unit of production. Therefore, they can use marginal revenue to raise output to the profit maximization point.

How are Marginal Revenue and the Demand Curve Related?

The marginal revenue on a graph reflects that positive marginal revenue corresponds to elastic demand, while negative marginal revenue corresponds to inelastic demand.

References:

From the source of Investopedia: Marginal profit, What is marginal revenue?

From the source of Paddle.com: Profit margin, How to get marginal revenue?