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What is Revenue in Economics
What is Revenue in Economics class 11 notes are presented in this post to understand the concept easily. Revenue is the amount of money that a producer receives from the sale of goods. We need to understand the concept of commodity and how it works.
- What is revenue?
- Total revenue definition
- Marginal revenue definition
What is Revenue in Economics
The amount of money a producer gets in exchange for the sale proceeds is known as revenue. Revenue refers to the amount received by a firm from the sale of a given commodity in the market. For example, if a firm gets Rs. 16,000 from selling 100 chairs, then Rs. 16,000 is known as revenue.
The concept consists of three terms – Total Revenue, Average Revenue, and Marginal Revenue.
Total Revenue (TR) revenue
Total Revenue (TR) refers to the total receipts from selling a given quantity of the commodity. It is the total income of a firm. TR is obtained by multiplying the quantity of the commodity sold by the price of the commodity.
TR = Quantity (Q) × Price (P)
For example, if a firm sells ten chairs at the price of Rs. 160 per chair, then the TR will be,
TR = 10×160 = Rs. 1600
Average Revenue (AR) under What is Revenue in Economics
Average Revenue (AR) refers to revenue per unit output sold. It is obtained by dividing the total revenue by the number of units sold.
AR = TR ÷ Q
For example, if TR from the sale of 10 chairs at Rs. 160 per chair is Rs. 1600, then,
AR = TR÷Q = 1600÷10
AR = Rs. 160
AR curve and price are the same. We know that AR equals per unit receipts, and the price is always per unit. Since sellers receive revenue according to price, price and AR are the same.
TR = Q×P
AR = TR ÷ Q
AR = ×P/
Therefore, AR = P
Marginal Revenue (MR) revenue under What is Revenue in Economics
Marginal Revenue (MR) refers to the additional revenue generated from selling an additional unit of output. It is the change in TR from one more unit of commodity.
MRn = TRn – TRn-1
Where,
MRn = MR of nth unit
TRn = TR from n units
TRn-1 = TR from (n-1) units
n = number of units sold
We now know that MR is the change in TR when one more unit of output is sold. However, when a change in units sold is greater than one unit, then MR can be calculated as,
MR = Change in TR/ Change in number of units
MR = ΔTR/ΔQ
Revenue class 11 notes give a comprehensive understanding of the concept in this post. You can stay active and engaged throughout your reading, revision, and lectures by taking these notes. Additionally, they aid in clear thinking and comprehension. Selectively identify important ideas. A useful record of important information and its sources can be found in these notes. These notes will help you remember what you heard better.