Revenue Formula In Economics

Since profit is the difference between revenue and cost the profit functions the revenue function minus the cost function.

Revenue formula in economics. Regarding the total revenue function only in a perfectly competitive market p is obtained to be a constant independent of the firm s quantity sold q. If a blouse sold for 50 to two customers before going on sale for 25 and sells at that price to an additional five customers the total would be 50 x 2 25. The revenue formula may be simple or complicated depending on the business. C 40 000 0 3 q where c is the total cost.

Total revenue should not be confused with average revenue which would multiply the cost of an item by seven then divide the total by seven to show the average price paid for the item. Total average and marginal revenue. It is the total income of a business and is calculated by multiplying the quantity of. A sample sales revenue calculation.

For a product based business the formula is revenue number of units sold x average price. Note we are measuring economic cost not accounting cost. In symbols π r c p q f v q. For service companies it is calculated as the value of all service contracts or by the number of.

The equation for the cost function is. For product sales it is calculated by taking the average price at which goods are sold and multiplying it by the total number of products sold. The revenue concepts are concerned with total revenue average revenue and marginal revenue. To calculate a change in revenue is a difference in total revenue and revenue figure before the additional unit was sold.

The marginal revenue formula is calculated by dividing the change in total revenue by the change in quantity sold. The term revenue refers to the income obtained by a firm through the sale of goods at different prices. π r c 1 2 q. For service based companies the formula is revenue number of customers x average price of services.

Revenue formula revenue is mainly used in economics and business to measure the success and progress of the trends in the total revenue. First we need to calculate the change in revenue. In the words of dooley the revenue of a firm is its sales receipts or income. However in most other types of market which would be generally called imperfectly competitive markets p depends inversely on q.

Why the sales. Sales revenue 1 000 x 350 350 000.