Marginal Revenue Concept
The expression Marginal Revenue (MR) designates the variation of the total revenue (TR) provoked by the variation in one unit in the production of a certain good (Q). In algebraic terms, MR = ΔTR/ΔQ, in which Δ means variation.
Theoretically, if the search of the good is elastic, the marginal revenue will be positive, is the search is inelastic, the marginal revenue will be negative and if the search presents unitary elasticity, the marginal revenue will be null. Such means that the meaning and intensity of the total revenue variation depends directly of the goods’ search elasticity at a certain point: if, for example, the good’s search elasticity is inferior to 1 (this is inelastic or stiff), means that a price reduction originates an increase less then proportional in the quantity searched, so that the total revenue variation (which results from the multiplication of the quantity by the price) will be negative if the companies increase the quantity offered.
