Marginal Revenue
Marginal revenue is the extra revenue earned from selling one additional unit.
Formula
Variables
Example
Revenue rises $180 when sales rise 10 units: MR = $18
How it works
Marginal revenue tells you how much total revenue changes when sales increase by a small amount, usually by one unit. It works because total revenue is the money from all units sold, so comparing revenue before and after one more sale isolates the extra income that last unit brings in. In markets where price changes with quantity, marginal revenue may be different from the selling price, because selling more units can require lowering the price on all units.
When to use it
Use this formula when analyzing pricing, sales, or production decisions and you want to know the revenue impact of selling one more item. It is especially useful in business, economics, and optimization problems involving demand and profit.
Worked example, step by step
A company’s total revenue increases from $2,450 to $2,690 when sales rise from 35 units to 40 units. ΔTR = $2,690 - $2,450 = $240 ΔQ = 40 - 35 = 5 units MR = ΔTR / ΔQ = 240 / 5 = $48 per unit Final answer: the marginal revenue is $48 for each additional unit sold.
Common mistakes to avoid
- using profit instead of total revenue in the formula
- dividing by the total number of units sold instead of the change in units
- assuming marginal revenue is always equal to price
Did You Know?
Profit is maximised where marginal revenue equals marginal cost — a cornerstone of microeconomics.
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More in Revenue & Sales
View allTotal Revenue
BasicTotal revenue is the selling price multiplied by the number of units sold.
Net Revenue
BasicNet revenue is gross revenue less returns, refunds and discounts — the amount actually recognised.
Average Revenue
BasicAverage revenue is total revenue divided by units sold — equal to price per unit in a single-price market.
Revenue Growth Rate
BasicThe percentage change in revenue from one period to the next.
Monthly Recurring Revenue
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Annual Recurring Revenue
BasicAnnual recurring revenue annualises the monthly recurring revenue of a subscription business.