Home » Various Revenue Concepts » Types of Revenues

# Types/Kinds of Revenue:

We have discussed earlier the various types of costs of a firm. Now the discussion will centre round the various types of revenue of a firm.

## Definition of Revenue:

By 'revenue' of a firm is meant the total sale proceeds or the total receipts of a firm from the sale of the output.

The various kinds of revenue will be discussed here under three heads:

(i) Total Revenue, (ii) Marginal Revenue, (iii) Average Revenue.

## (i) Total Revenue (TR):

### Definition:

By 'total revenue' of a firm is meant the total amount of sale proceeds or the total receipts of the firm.

### Example:

If a firm producing cloth sells one hundred meters of cloth in the market at \$4 per meter, the sale proceeds or the receipts of the firm win be \$400. This total sale proceed which a firm has received by selling 100 meters of cloth is called its total revenue. The total revenue varies with the sales of a firm.

### Formula:

Total Revenue = Price x Quantity Sold

TR = P.q

Here:

P means price.

q means quantity.

TR means total revenue.

TR = 4 x 100

TR = \$400

## (ii) Marginal Revenue (MR):

### Definition:

Marginal revenue is the addition made to the total revenue by a one unit increase in the volume of sales by the firm in the market. It can also called as the net revenue earned by selling on additional unit of output.

### Example:

For example, if a firm sells 100 meters of cloth at \$4 per meters, the total revenue of the firm is \$400. If it increases the volume of sale from 100 meters to 101 meters, i.e., by one meter, the total revenue of the firm goes up to \$404. The addition of \$4 which has taken place in the total revenue by a one unit increase in the rate of sales per period of time is known as marginal revenue. MR can be expressed as follows.

MR = ΔTR

Δq

## (iii) Average Revenue (ARABI):

### Definition:

Average revenue is revenue earned per unit of output. Average revenue is obtained by dividing the total revenue by the number of units sold in the market.

### Example:

For example, a firm sells 200 meters of cloth for \$600, then the average, revenue will be 600 / 200 = \$3 only. Average revenue represents the average sale price per unit of the commodity. Average revenue curve can also be called demand curve.

### Formula:

Average Revenue = Total Revenue

Total Output Sold

AR = TR

q

## Relevant Articles:

» Types/Kinds of Revenues
» Revenue Curves of an Individual Firm Under Perfect Competition
»

## Revenue Curves of an Individual Firm Under Imperfect Competition

 Principles and Theories of Micro Economics Definition and Explanation of Economics Theory of Consumer Behavior Indifference Curve Analysis of Consumer's Equilibrium Theory of Demand Theory of Supply Elasticity of Demand Elasticity of Supply Equilibrium of Demand and Supply Economic Resources Scale of Production Laws of Returns Production Function Cost Analysis Various Revenue Concepts Price and output Determination Under Perfect Competition Price and Output Determination Under Monopoly Price and Output Determination Under Monopolistic/Imperfect Competition Theory of Factor Pricing OR Theory of Distribution Rent Wages Interest Profits
 Principles and Theories of Macro Economics National Income and Its Measurement Principles of Public Finance Public Revenue and Taxation National Debt and Income Determination Fiscal Policy Determinants of the Level of National Income and Employment Determination of National Income Theories of Employment Theory of International Trade Balance of Payments Commercial Policy
 Development and Planning Economics Introduction to Development Economics Features of Developing Countries Economic Development and Economic Growth Theories of Under Development Theories of Economic Growth Agriculture and Economic Development Monetary Economics and Public Finance History of Money