NIT - K

Revenue
Total
Average
Marginal

B Sarah
REVENUE NIT - KKR

Revenue is the monetary receipts from the sale of the products

1. Total Revenue : TR is the total money receipts from the sale of its total product.
For eg: if a producer of pens produces 100 pens and sell it at Rs 5 each
TR = Price X Quantity of output sold. Then TR is 5 x 100 = Rs. 500
2. Average Revenue :AR is the revenue per unit of commodity sold.
AR = Total Revenue (TR) / No. of outputs sold (Q) Then AR is = 500/100 = Rs. 5

3. Marginal Revenue: MR is the addition to total revenue by the sale of an additional unit of output.
It is the revenue from sale of marginal unit (additional unit).
For eg:, if TR from 100 units of output is Rs. 500 and when one more unit is sold, if it becomes Rs. 505,
If P = 5 MRn= TRn – TR (n-1), Then, MR = 505 – 500 = Rs. 5, AR = 505/101 = 5
For eg:, if TR from 100 units of output is Rs. 500 and when one more unit is sold, if it becomes Rs. 503
If P = 3 MRn= TRn – TR (n-1), Then, MR = 503 – 500 = Rs. 3, AR = 503/101 = 4.98
B Sarah
 Relationship between Total Revenue, Average Revenue and Marginal Revenue
NIT - KKR

Relationship between TR and MR

1. When TR is increasing at increasing rate, MR is increasing

Units of TR AR MR
output
2. When TR is increasing at decreasing rate, MR is declining
(X)
1 10 10 10 3. When TR is increasing at constant rate, MR is constant
2 24 12 14 B Sarah 4. When TR is maximum, MR is zero
3 42 14 18
5. When TR is declining, MR is negative
4 56 14 14
5 60 14 4 Relationship between AR and MR
6 60 12 0
1. When AR is constant, MR = AR
7 56 10 -4
8 48 6 -8
2. When MR = AR, curves same horizontal line parallel to x-axis

3. When AR is rising, MR is above AR

4. When AR is falling, MR is below AR

B Sarah 5. MR can be fall to zero and even negative but AR can never be
negative

B Sarah