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Simple English definitions for legal terms
marginal revenue
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A quick definition of marginal revenue:
Definition: Marginal revenue is the extra money a company makes by selling one more unit of a product. It is the difference between the revenue earned from selling the last unit and the revenue earned from selling the second-to-last unit. For example, if a company sells 10 units of a product for $100 and then sells 11 units for $110, the marginal revenue for the 11th unit is $10.
A more thorough explanation:
Marginal revenue refers to the additional revenue earned from the sale of one more unit of a product or service.
- If a company sells 100 units of a product for $10 each and then sells 101 units for $9.50 each, the marginal revenue for the 101st unit is $9.50.
- A restaurant that sells 50 meals for $20 each and then sells 51 meals for $19 each has a marginal revenue of $19.
These examples show how marginal revenue is calculated by looking at the change in revenue from selling one additional unit. In both cases, the marginal revenue is lower than the previous unit's price because the company had to lower the price to sell the additional unit.