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Revision:Revenue

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TSR Wiki > Study Help > Subjects and Revision > Revision Notes > Economics > Revenue

Revenue is the income generated from sales in the market.

Total\ revenue = price \times quantity

Average\ revenue = \frac{price \times quantity}{quantity} = price

From this equation we can see that the demand function for the firm is equal to average revenue.

The gradient of marginal revenue is double that or average revenue. Revenue is maximised when marginal revenue = 0.


Revenue with elastic demand

Main article: Perfect competition

Under perfect competition, each firm has an elastic PED. This is because in a perfectly competitive market, the firm is a price taker.

When AR is horizontal, MR=AR.

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