Calculating Marginal Revenue Using Demand Schedule
What is the concept of marginal revenue and how is it calculated using the demand schedule?
Multiple choice question:
A. $125
B. $300
Concept of Marginal Revenue:
Marginal revenue is the additional revenue that a company receives from selling one more unit of a product. It is an important concept in economics that helps businesses determine how changes in production levels will affect their overall revenue.
Calculating Marginal Revenue Using Demand Schedule:
To calculate marginal revenue using the demand schedule, you need to analyze the relationship between the change in quantity sold and the corresponding change in total revenue. By comparing the total revenue for two different quantity levels, you can determine the marginal revenue for a specific unit.
When analyzing the demand schedule to calculate marginal revenue, you should focus on the total revenue generated from selling different quantities of the product at varying prices. The key steps to calculate marginal revenue using the demand schedule are:
Step 1: Understand the Demand Schedule
The demand schedule shows the quantity of a product consumers are willing to buy at different price levels. It provides valuable information for businesses to determine the optimal pricing strategy and production levels.
Step 2: Calculate Total Revenue
Determine the total revenue generated from selling a specific quantity of the product. This can be computed by multiplying the price per unit by the quantity sold.
Step 3: Analyze Marginal Revenue
To calculate the marginal revenue for a specific unit, compare the total revenue from selling one less unit with the total revenue from selling the additional unit. The difference in total revenue divided by the change in quantity sold gives you the marginal revenue for that unit.
By following these steps and understanding the concept of marginal revenue, businesses can make informed decisions about pricing, production levels, and revenue optimization.