Marginal Revenue Calculator

About Marginal Revenue Calculator

What is marginal revenue?
The term marginal revenue represents the increase in revenue generated due to the sale of an additional unit of a product in the business. This is subsequently followed by the so-called law of diminishing returns, which will slow down in line with rising production levels. Explained in more detail, if your company’s revenue increases and if the number of units of product sold increases, marginal revenue will represent an increase per unit sold. Also, if you are in a situation to charge higher prices, you will sell fewer units of product, but your earnings will be higher for each item individually. Often companies examine the realized marginal revenues to determine the level of realized earnings. In the theory of economic sciences, perfectly competitive companies include those that continue to produce their range of products on the market until the marginal revenue is equated with marginal costs.


What is the difference between marginal cost and marginal revenue?
It is necessary to explain the connection of marginal cost with marginal revenue in more detail. Companies that want to maximize their profits will produce products where the marginal cost will be one marginal revenue. Suppose marginal revenue is realized below the number of marginal costs. In that case, this is a good sign that it is necessary to stop production and perform additional analysis of the costs incurred. In essence, the marginal cost of production means the change in the cost incurred in producing one other production unit. By analyzing marginal costs, a company can determine at what point in showing it will achieve economies of scale to optimize production and operations. This term represents an essential concept in accounting, as it serves as an aid in production optimization. The marginal cost includes all costs that change with the change in the level of production. If you realize that the marginal cost of production is lower than the price per unit of product, this will be a profit for you.

How to calculate marginal revenue?
The process of calculating marginal revenue is straightforward. It is important to remember that marginal revenue is derived from the calculation of units sold. The previously presented formula divides the calculation of marginal revenue into two separate elements, the one related to the change in income and the other related to the change in quantity.


Marginal revenue – example
We can explain this very simply with a classic example:

imagine that one person A sells ten books a day. If person A decides to now sell 15 pieces of books daily, the previously earned total income would be $ 20, while it is now $ 28. When we enter this data into the formula, the change in revenue is $ 8, while the change in quantity is $ 5. Marginal revenue after book sales is $ 1.60 per book sold.