total revenue

Profit maximization - Total revenue - total cost perspective 1 The profit-maximizing output level is represented as the one at which total revenue is the height of C and total cost is the height of B; the maximal profit is measured as CB

Price elasticity - Effect on total revenue 1 A firm considering a price change must know what effect the change in price will have on total revenue. Revenue is simply the product of unit price times quantity:

Price elasticity - Effect on total revenue 1 Elasticity provides the answer: The percentage change in total revenue is approximately equal to the percentage change in quantity demanded plus the percentage change in price

Price elasticity - Effect on total revenue 1 As a result, the relationship between PED and total revenue can be described for any good:Gillespie, Andrew (2002). p.51.Arnold, Roger (2008). p

Price elasticity - Effect on total revenue 1 * When the price elasticity of demand for a Good (economics and accounting)|good is perfectly inelastic (Ed = 0), changes in the price do not affect the quantity demanded for the good; raising prices will always cause total revenue to increase

Total revenue 1 'Total revenue' is the total receipts of a firm from the sale of any given quantity of a product.

Total revenue 1 It can be calculated as the selling price of the firm's product times the quantity sold, i.e. total revenue = price × quantity, or letting TR be the total revenue function:

Total revenue test 1 In economics, the 'Total Revenue Test' is a means for determining whether demand is elasticity (economics)|elastic or inelastic. If an increase in price causes an increase in total revenue, then demand can be said to be inelastic, since the increase in price does not have a large impact on quantity demanded. If an increase in price causes a decrease in total revenue, then demand can be said to be elastic, since the increase in price has a large impact on quantity demanded.

Total revenue test 1 1. Product A currently sells for $10. The seller decides to increase the price to $15, but finds that he ends up making less money. This is because he is selling fewer of the product due to the increased price, and his total revenue has fallen. The demand for this product must be elastic.

Total revenue test - Mathematical explanation 1 On the other hand, total revenue is given by TR=P \cdot Q.

Total revenue test - Mathematical explanation 1 Since Q is a function of P, Q = f(P) total revenue can be rewritten as

Total revenue test - Mathematical explanation 1 The differential of total revenue with respect to P is thus:

Total revenue test - Mathematical explanation 1 To find the elasticity of demand using the mathematical explanation of the total revenue test, it’s necessary to use the following rule:

Total revenue test - Mathematical explanation 1 If demand is elastic, E_d 0 \!\ : price and total revenue move in opposite directions.

Total revenue test - Mathematical explanation 1 If demand is inelastic, E_d 0 \!\ : price and total revenue change in the same direction.

Total revenue test - Mathematical explanation 1 If demand is unit elastic, E_d = 1, then \frac = 0: an increase in price has no influence on the total revenue.

Total revenue test - Graph explanation 1 Total revenue can be represented by a square or a rectangle formed by connecting the following four points on the demand graph: Price (P), Quantity demanded (Q), Point on the Demand Curve (A) and the origin zero (0) (the intersection of the X axis and the Y axis).

Total revenue test - Graph explanation 1 This rectangle or square is the measure of total revenue.

Total revenue test - Graph explanation 1 When price or quantity change the square changes. The change in total revenue caused by price is called the price effect. The change in total revenue caused by quantity is called the quantity effect.

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