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Concepts of Revenue



Concepts of Revenue: 
1. Revenue 
2. Total Revenue 
3. Average Revenue
4. Marginal Revenue 
5. Profit 

1. Revenue: 
Revenue means the sale receipt of the quantity or output produced in a firm.

2. Total Revenue (TR)
Total revenue (TR) is the value of a firm’s sales. In other words, total revenue refers to the total amount of money that a firm can obtain from the sales of its product. The formula is shown as below:

TR = P x Q

For example, Firm JLQ sells 5000 pair of shoes at the rate of RM50.00. Firm JLQ’s total revenue is

TR = P x Q
      = 50 x 5000
      = RM250 000.00

3. Average Revenue (AR)
Average revenue (AR) is defined as the total revenue per unit output sold. The formula is as shown below:

AR = P
AR = TR/Q

4. Marginal Revenue (MR)
Marginal revenue (MR) refers to the change in total revenue resulting from a one unit increase in quantity sold. Marginal revenue is equal to the change in total revenue divided by the change in output sold. The formula is as shown below:

MR = change in TR / Change in Q
 
5. Profit
Profit is the difference between the purchase price and the costs of bringing to market.

Profit = Total Revenue (TR) – Total Cost (TC)