Class 11 Micro Economics Notes · CBSE

Concept of Revenue (TR, AR, MR)

Concept of Revenue — understanding the three revenue concepts: Total Revenue, Average Revenue and Marginal Revenue. CBSE Class 11 Microeconomics notes with formulas, the revenue schedule and practice problems.

Last updated: 12 Sep 2026

Notes

The Three Concepts of Revenue

Revenue consists of three concepts: Total Revenue, Average Revenue and Marginal Revenue.

REVENUE

Total Revenue (TR)

TR = Quantity × Price

Total receipts from the sale of a given quantity of a commodity — the total income of a firm.

Average Revenue (AR)

AR = TR ÷ Quantity = Price

Revenue per unit of output sold.

Marginal Revenue (MR)

MR = TRₙ − TRₙ₋₁ OR MR = ΔTR ÷ ΔQ

Addition to TR from selling one more unit of output.

Total Revenue (TR)

Total Revenue refers to total receipts from the sale of a given quantity of a commodity. It is the total income of a firm.

Total revenue = Quantity sold × Price of the commodity.

Total Revenue

TR = Q \times P

Average Revenue (AR)

Average revenue refers to revenue per unit of output sold. It is obtained by dividing the total revenue by the number of units sold.

Average Revenue

AR = \frac{TR}{Q}

AR and Price are the Same — Derivation

Step 1

TR = Quantity × Price

Step 2

AR = TR ÷ Quantity

Step 3 (substitute)

AR = (Quantity × Price) ÷ Quantity

Result

AR = Price

Since sellers receive revenue according to price and price is always per unit, AR and price are one and the same thing.

The AR curve is the same as the Demand Curve of a firm.

Marginal Revenue (MR)

Marginal revenue is the additional revenue generated from the sale of an additional unit of output. It is the change in TR from sale of one more unit of a commodity.

Marginal Revenue

MR_n = TR_n - TR_{n-1}

Where:

MR_n = Marginal Revenue of the n^th unit

TR_n = Total revenue from n units

TR_n-1 = Total revenue from (n−1) units

MR — When Change in Units > 1

MR = \frac{\Delta TR}{\Delta Q}

Slope of the TR Curve is represented by Marginal Revenue (MR) as MR = ΔTR ÷ ΔQ.

TR is the Summation of MR

TR from MR

TR = \sum MR

Total Revenue can also be calculated as the sum of marginal revenues of all the units sold: TR = ΣMR.

The Revenue Schedule

Units Sold (Q)	Price (₹) (P)	TR (₹) = Q × P	AR (₹) = TR ÷ Q = P	MR (₹) = TRₙ − TRₙ₋₁
1	10	10	10	10
2	9	18	9	8
3	8	24	8	6
4	7	28	7	4
5	6	30	6	2
6	5	30	5	0
7	4	28	4	−2

AR = Price in every row. MR falls faster than AR — MR becomes zero at Q = 6 and negative at Q = 7 while AR stays positive.