Marginal Revenue Function From Demand Function

The product rule from calculus is used.

Marginal revenue function from demand function. Diagrammatical explanation of marginal revenue mr marginal revenue is the change in aggregate revenue when the volume of selling unit is increased by one unit. This situation still follows the rule that the marginal revenue curve is twice as steep as the demand curve since twice a slope of zero is still a slope of zero. There is a useful relationship between marginal revenue mr and the price elasticity of demand e d. In this case marginal revenue is equal to price as opposed to being strictly less than price and as a result the marginal revenue curve is the same as the demand curve.

Ii the marginal revenue mr is approximately equal to the additional revenue made on selling of x 1 th unit whenx the sales level is x units. It is derived by taking the first derivative of the total revenue tr function. Marginal revenue and marginal profit work the same way. Before doing an example involving marginals there s one more piece of business to take care of.