Lesson 3: Revenue Theory
Learning Objective: I can explain and illustrate the relationship between average revenue, marginal revenue, total revenue, and PED.
Revenue Theory-Revenue is the income that a firm receives from selling its products, goods/services, over a certain time period.
Measurement of Revenue:
1.Total Revenue (TR) = p x q
Revenue Theory-Revenue is the income that a firm receives from selling its products, goods/services, over a certain time period.
Measurement of Revenue:
1.Total Revenue (TR) = p x q
- If a firm sells 400 pizzas per week, at a price of $6 per pizza, then: TR = $6 x 400 = $2400
- AR = $2400/400 = $6
- If the pizza firm lowered the price of a pizza to $5 and found weekly sales rose to 500 pizzas
- MR = $2500-$2400/100 = $100/100 = $1