How to Calculate Total Revenue
Total revenue equals price multiplied by the quantity sold: TR = P × Q.
The Total Revenue formula
Calculator
Enter price and quantity at two points to get total revenue at each and what the change says about elasticity.
Units sold at that price, read off the demand schedule.
Comparing revenue before and after a price change is the total revenue test for elasticity.
$15 on each of 400 units. Total revenue counts money in, so it says nothing about cost or profit.
- Total revenue after the price change
- $6,720
- Change in total revenue
- $720
- Percent change in total revenue
- 12%
- Elasticity over this range
- Elastic
The second price multiplied by the quantity buyers take at that price.
Revenue at the new price minus revenue at the old one.
The size of the revenue move, measured against the starting revenue.
Revenue moved opposite to price, so quantity responded more than proportionally: demand is elastic here.
How to calculate Total Revenue, step by step
- 1Find the price per unit. Use the price buyers actually pay at the output level in question.
- 2Find the quantity sold. Read the number of units sold at that price from the demand schedule or table.
- 3Multiply. Total revenue = P × Q, and the answer is a dollar amount, not a rate.
- 4Recalculate at a second price if asked. Comparing total revenue before and after a price change shows whether demand is elastic or inelastic over that range.
Worked example: Total Revenue
A firm sells 400 units at $15 each, so total revenue = 15 × 400 = $6,000. If it lowers the price to $12 and sells 560 units, total revenue = 12 × 560 = $6,720. Revenue rose when price fell, so demand is elastic between those two points.
Total Revenue questions
What is the difference between total revenue and profit?
Total revenue is all the money taken in from sales, while profit is what remains after costs are subtracted, so a firm can post high revenue and still lose money.
How does total revenue relate to marginal revenue?
Marginal revenue is the change in total revenue from selling one more unit, so MR = change in TR ÷ change in Q.
When is total revenue at its maximum?
Total revenue peaks where marginal revenue equals zero, the unit-elastic point where demand switches from elastic to inelastic.
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