Posted by Anjali Kaur on Oct 01, 2020

# Types of Revenue

There are 3 types of revenue that we mainly study under the forms of different markets. These includes:

1. Total Revenue (TR)
2. Average Revenue (AR)
3. Marginal Revenue (MR)

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## 1. Total Revenue

Total revenue refers to the total receipts from the sale of a given quantity of a commodity.

It is the total income of a firm.

### Formulas of Total Revenue

Total Revenue = Price X Quantity Sold

TR = PxQ

or

TR = Summation of Marginal Revenue

#### TR curve under Perfect Competition

Under perfect competition, as the prices are fixed by the industries, the TR curve is upward sloping. As shown below:

#### TR curve under Imperfect Competition

The imperfect competition includes monopoly, monopolistic competition, and oligopoly. TR curve under these market form looks like:

## 2. Average Revenue

Average revenue refers to the revenue per unit of output sold. It is also known as the price.

### Formula for AR

AR = Total Revenue/ Quantity

AR = TR/Q

Since, TR = PxQ

AR = PxQ/ Q

Hence,

AR = PxQ

#### Shape of AR curve under perfect competition

Under perfect competition, prices are fixed. So, AR is also fixed. It is horizontal in shape, or parallel to the x-axis. As shown below,

#### Shape of AR curve under Imperfect market

AR curve is downward sloping. AR curve is also known as the demand curve under an imperfect market.

## 3. Marginal Revenue

Marginal revenue is the additional revenue generated from the sale of an additional unit of output.

### Formula for MR

MR = Change in TR/ Change in Q

MR= 1/2 of AR curve

#### MR Curve under perfect competition

Under Perfect competition MR and AR (Price) are same. As shown below:

#### MR Curve under imperfect competition

Under any other market form, MR is a downward sloping curve, which becomes negative.

MR = 1/2 of AR under these market forms.

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