Marginal Revenue Calculator
Enter quantity and total revenue before and after a change to find the extra revenue earned per extra unit sold.
Updated
Marginal Revenue Calculator
Our Marginal Revenue Calculator shows how much extra revenue each extra unit sold brings in. Enter the quantity and total revenue before and after a change in output or price, and marginal revenue (MR) appears at once, with the change in revenue, the change in quantity, the average price at each point and the working. It is useful for pricing decisions, production planning and microeconomics coursework.
Quick answer
Marginal revenue is ΔTR ÷ ΔQ: 18,000 ÷ 20 = 900 extra revenue per extra unit.
- ΔTR: final total revenue minus initial total revenue.
- ΔQ: final quantity minus initial quantity, which cannot be 0.
- Profit rule: output is most profitable where marginal revenue equals marginal cost.
- Price link: MR equals price in perfect competition and falls below it when a firm must cut price to sell more.
What Is Marginal Revenue?
Marginal revenue is the extra total revenue a business earns from selling one more unit of output. Over a change of several units it is the change in total revenue divided by the change in quantity:
ΔQ = Q final − Q initial
MR = ΔTR ÷ ΔQ
- Total revenue (TR): price × quantity sold, the money taken in before any costs.
- Quantity (Q): units sold, such as products, subscriptions or hours.
- Marginal revenue (MR): the slope of the total revenue curve between the two points.
Because it uses revenue, not profit, marginal revenue says nothing about costs on its own. It becomes a decision tool when it is compared with marginal cost.
How to Calculate Marginal Revenue
A phone maker sells 100 phones for total revenue of 120,000. After a small price cut it sells 120 phones for 138,000:
120 − 100 = 20
18,000 ÷ 20 = 900
- Find the change in revenue. 138,000 − 120,000 = 18,000.
- Find the change in quantity. 120 − 100 = 20 phones.
- Divide. 18,000 ÷ 20 = 900 of extra revenue per extra phone.
The average price fell from 1,200 to 1,150, yet each extra phone added only 900. Marginal revenue sits below price because the lower price applies to every phone sold, not just the extra 20.
Marginal Revenue Examples
| Case: Q and TR before → after | MR |
|---|---|
| Software: 200, 80,000 → 260, 95,000 | 250 |
| Bakery: 100, 12,000 → 130, 16,900 | ≈ 163.33 |
| Farm: 1,000, 8,000 → 1,200, 9,600 | 8 |
| Price cut: 500, 10,000 → 600, 9,000 | −10 |
| Price rise: 400, 20,000 → 350, 21,000 | −20 |
The software firm gains 250 for each extra subscription, while its average price drops from 400 to about 365.38. The farm sells every unit at 8, so marginal revenue equals the price, as it does in a perfectly competitive market. The price cut from 20 to 15 sold 100 more units but lost 1,000 of revenue, giving −10. The price rise from 50 to 60 sold 50 fewer units yet earned 1,000 more, so quantity and revenue moved in opposite directions and marginal revenue is −20.
How to Read the Result
- Equal to price
- Every unit sells at the same price, as for a firm in perfect competition.
- Positive
- Selling more raises total revenue. Demand is elastic over this range.
- Zero
- Total revenue is at its peak. Demand is unit elastic.
- Negative
- Selling more lowers total revenue. Demand is inelastic, so a higher price would earn more.
When quantity falls (ΔQ below 0), read the sign the same way: a negative result still means revenue and quantity moved in opposite directions.
Marginal Revenue, Price and Elasticity
For a firm that must lower its price to sell more, marginal revenue is linked to the price and the price elasticity of demand (E, a negative number):
- Elastic demand: at a price of 100 and E = −2, MR = 100 × (1 − 0.5) = 50.
- Inelastic demand: at a price of 100 and E = −0.5, MR = 100 × (1 − 2) = −100.
- Straight-line demand: if P = 100 − 2Q, then TR = 100Q − 2Q², and MR = 100 − 4Q falls twice as fast as price.
To find E from two prices and quantities, use our Price Elasticity of Demand Calculator.
Marginal Revenue and Profit Maximisation
A firm earns the most profit at the output where marginal revenue equals marginal cost (MR = MC):
- MR above MC: the next unit adds more revenue than cost, so producing more raises profit.
- MR below MC: the next unit costs more than it brings in, so producing less raises profit.
- MR = MC: no small change in output can raise profit further.
In the phone example, if each extra phone costs 700 to make, the extra 20 phones add 900 − 700 = 200 each, or 4,000 of profit, so expanding was worth it.
Limitations and Common Mistakes
- Using profit instead of revenue. Enter total revenue (price × quantity) at each point, not profit or margin.
- Using price instead of total revenue. The revenue fields need the total for all units sold, not the price of one unit.
- Large jumps. Over a big change in quantity the result is an average for the range, not the exact MR of the last unit.
- Other things changing. Advertising, seasons or competitor moves can shift revenue between the two points, so MR may not reflect quantity alone.
- No change in quantity. When ΔQ is 0 the division is undefined, so the calculator asks for two different quantities.
How to Use the Marginal Revenue Calculator
- Enter the starting point. Type the initial quantity sold and the total revenue at that quantity, such as 100 and 120,000. Commas are fine.
- Enter the new point. Type the final quantity and its total revenue, such as 120 and 138,000. The quantity must differ from the first one.
- Read and copy the result. Marginal revenue appears as you type, with the working, the change in revenue, the change in quantity and the average price at each point. Press Copy to copy it, or Clear or Esc to start again.
Example: 200 subscriptions earn 80,000 and 260 earn 95,000. The result is 250, from 15,000 ÷ 60 = 250 per extra subscription.
Who Can Use This Calculator?
Frequently Asked Questions (FAQs)
What is the marginal revenue formula?
Marginal revenue = change in total revenue ÷ change in quantity, or MR = ΔTR ÷ ΔQ, where ΔTR = final revenue − initial revenue and ΔQ = final quantity − initial quantity.
How do you calculate marginal revenue from an example?
If 100 units earn 120,000 and 120 units earn 138,000, then ΔTR = 18,000 and ΔQ = 20. Marginal revenue = 18,000 ÷ 20 = 900 per extra unit.
Can marginal revenue be negative?
Yes. It is negative when total revenue and quantity move in opposite directions, for example when a price cut sells more units but brings in less revenue. It means demand is inelastic over that range.
Can marginal revenue be positive when sales fall?
Yes, when total revenue falls as well. If both quantity and revenue drop, ΔTR and ΔQ are both negative, so marginal revenue is positive.
Is marginal revenue the same as price?
Only in perfect competition, where every unit sells at the market price. A firm that must cut its price to sell more has marginal revenue below price, because the lower price applies to all units sold.
Why is profit maximised where marginal revenue equals marginal cost?
While MR is above MC, each extra unit adds to profit; once MR falls below MC, each extra unit reduces it. Profit is highest where the two are equal.
How is marginal revenue related to elasticity?
MR = P × (1 + 1 ÷ E), where E is the price elasticity of demand. MR is positive when demand is elastic, zero when it is unit elastic and negative when it is inelastic.
Is the Marginal Revenue Calculator free?
Yes. It is completely free, needs no sign-up, and can be used as many times as you like.
Sources
- Wikipedia. Marginal revenue.
- Wikipedia. Total revenue.
- Wikipedia. Profit maximization.
- Wikipedia. Price elasticity of demand.
- OpenStax, Principles of Economics 3e. 8.2 How Perfectly Competitive Firms Make Output Decisions.
- OpenStax, Principles of Economics 3e. 9.2 How a Profit-Maximizing Monopoly Chooses Output and Price.
- Corporate Finance Institute. Marginal Revenue.
- WallStreetMojo. Marginal Revenue Formula.
Try our Marginal Revenue Calculator to see how much each extra unit sold adds to revenue.