![]() ![]() The equation is the alternate revenue, subtracted by the original revenue, divided by the alternate products sold and subtracted by the current products sold. You can now calculate the marginal cost using the alt and total revenue. Related: Competitive Pricing: Definition, Strategies and Tips 4. x = alt revenueįor example, if the alternate price per product is $3 and the alternate number sold is 3,000, the alt revenue would be $9,000, highlighted as follows: The formula below can help you calculate the alt revenue: This number equals the alternate price multiplied by the alternate number of products sold. Calculate the alt revenueĪfter you have analyzed the market and determined your alternate price and the alternate number of products sold, you can use these numbers to calculate the alt revenue. Related: How To Do a Comparative Marketing Analysis 3. According to the principles of economics, a business can usually sell more of its products at a lower price point because the demand increases. When analyzing the market, look at competitors and at what price they sell their products. The next step in calculating marginal revenue is to perform a market analysis that provides insights into a lower alternate price and an alternate number of products sold at that price. Marginal Revenue: What's the Difference? 2. x = total revenueįor example, if the current price per product is $5 and the current number of products a business has sold is 1,000, the total revenue would be $5,000 because: You can find this number by multiplying the current price per product by the current number of products sold. ![]() To determine marginal revenue, first find the total revenue. ![]() Marginal revenue = (current revenue - initial revenue) / (current product quantity - initial product quantity) How to calculate marginal revenueīelow are steps you can use to calculate marginal revenue: 1. Marginal revenue = change in revenue / change in quantity The formulas for calculating marginal revenue are as follows: The difference between the money it made Monday compared to Tuesday is $100. ![]() On Tuesday, it sells 110 shirts for $1,100. If a business is perfectly competitive, marginal revenue refers to continuing to produce output until the total marginal revenue is equal to the marginal cost.įor example, a company sells 100 shirts on a Monday at a per-cost price of $10 for $1,000. This revenue calculation follows the law of diminishing returns because it slows down as the output level goes up, even after a period of consistent output. Marginal revenue is the revenue increase resulting from an additional unit's sale. ![]()
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