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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.

 

Formula:

 

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
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Principles and Theories of Macro Economics
National Income and Its Measurement
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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
 

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