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Meaning of revenue

The amount of money which the firm receives by the sale of its output in the market is known as its revenue. It is also known as ‘Sales Receipts’. There are three types of Revenue.

Total revenue

Total revenue refers to the total amount of money that a firm receives from the sale of its products.
Mathematically, TR = P x Q
  • TR=Total Revenue
  • P=Price
  • Q=Quantity sold

If the shopkeeper sold 10 boxes of chocolates each at  500/- then his total revenue would be


TR = P x Q


= 500 x 10


TR= 5,000


Average revenue

Average revenue is the revenue per unit of the commodity sold. It is calculated by dividing the total revenue by the number of units sold.
AR=Average Revenue
TR=Total Revenue
AR = P x Q/Q
AR=Average Revenue
Q=Quantity sold
Or, AR=P
Thus, average revenue means price of the product.



If the seller made revenue of  25000 selling 10 sarees, then the average revenue per saree is


AR= TR / Q




AR=  2,500/-


Marginal Revenue

Marginal revenue is the addition made to the total revenue by selling one more unit of a commodity
MR = Change in TR ÷ Change in Q
MR = TRn – TRn-1
Where, Q= number of units
MRn= Marginal revenue of the nth unit
TRn= Total revenue of n units
TRn-1= Total revenue of n-1 units



If the total revenue of a merchant by selling 50 mobile phones is  5,00,000 and by selling 51 mobiles phones, it is  5,20,000, then MR is


MR51 = TR at 51 – TR at 50


= 5,20,000 – 5,00,000


MR=  20,000.


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