Marginal revenue, or MR, is the incremental revenue from selling an additional unit.
MR changes depending on how many units sell. For example, the first 10 units could sell for $100. To sell the next 10 units (#11 – 20) they would have to sell for $90. The next 10 units (#21 – 30) would only sell for $80. In this case, the marginal revenue of selling unit #22 would be $80. The marginal revenue of selling unit #9 would be $100.
Marginal Revenue = Change in Total Revenue ÷ Change in Quantity
Change in total revenue is $200 and change in quantity is 1,000 units.
Marginal Revenue = $200 ÷ 1,000 = 0.20
Marginal revenue is 0.20.
- Wikipedia – Marginal Revenue – An explanation of marginal revenue including formulas.
- Investopedia – Marginal Revenue – MR – An introduction to the concept of marginal revenue.
- Khan Academy – Marginal Revenue and Marginal Cost – part of a larger course on microeconomics, this video explains the concepts of MR and MC.
- Houston Chronicle Small Business – How to calculate marginal revenue – A short explanation on how marginal revenue is calculated.