Revenue Profit And Cost Functions

Graphs of revenue cost and profit functions for ice cream bar business at price of 1 50.

Revenue profit and cost functions. If every cookie cost 50 cents to make our revenue function becomes. The equation for the cost function is. 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. Once again put x 25.

C 40 000 0 3 q where c is the total cost. Revenue is income cost is expense and the difference revenue cost is profit or loss. Calculating the profit function. P x r x c x 5000 4700 300 4700 came from part 1.

R x 200 x 200 25 5000. The excess of total revenue over the total cost of production is called the profit. Note we are measuring economic cost not accounting cost. Since profit is the difference between revenue and cost the profit functions the revenue function minus the cost function.

In symbols π r c p q f v q. Profit r c. If r x is the total revenue and c x is the total cost then profit function p x. The profit function is just the revenue function minus the cost function.

Profit 0 50 x 50 00 0. So the revenue is the amount you sell the tables for multiplied by how many tables. For our simple lemonade stand the profit function would be. π r c 1 2 q.