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March 5th, 2008, 07:17 AM  #1 
Newbie Joined: Oct 2007 Posts: 19 Thanks: 0  quick hw question
what is the equation for MR(marginal revenue)?

May 17th, 2008, 10:44 PM  #2 
Newbie Joined: May 2008 Posts: 21 Thanks: 0 
Let T = total revenue, P = price, and Q = quantity then T = P * Q call this (*) ie if I am selling a widget that costs 10 bucks and I sell 10 of them T = 10 * 10 = $100 Obvious so far? The meaning of marginal revenue is the change in total revenue per unit of a given item. In our above example, Marginal Revenue would characterize the change in revenue provided that we produced one more widget. Sound like a derivative doesn't it? To obtain Marginal Revenue we proceed by differentiating (*) with respect to quantity Q: MR = dT / dQ = dP/ dQ * Q + dQ /dQ * P = dP/ dQ * Q + P and there is your formula for marginal revenue. Remember the underlying idea that MR is a derivative of total revenue. If you can keep that in mind you can derive the above formula at anytime without memorization. 

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