Marginal Revenue Calculator

Easily calculate the additional revenue generated by increasing product sales by one unit.

Change in Revenue
Initial revenue
? Revenue earned before the change in production level.
$
Final revenue
? Revenue earned after the change in production level.
$
Change in total revenue
? The difference between Final Revenue and Initial Revenue (ΔTR).
$
Change in Quantity
Initial quantity
? Number of units produced/sold before the change.
Final quantity
? Number of units produced/sold after the change.
Change in quantity
? The difference between Final Quantity and Initial Quantity (ΔQ).
Marginal Revenue
Marginal revenue
? The increase in revenue resulting from selling one additional unit. MR = ΔTR / ΔQ.
$
Marginal Revenue Calculator by VersaCalculator

What Is Marginal Revenue?

In the world of business and economics, not all revenue is created equal. Marginal Revenue (MR) is the additional income generated from selling one single additional unit of a good or service.

It answers a specific, critical question for business owners: “If I produce one more item, how much extra money enters the register?”

While total revenue tracks your overall sales performance, marginal revenue measures the rate of change. It is the financial pulse of your production levels, helping you decide whether scaling up operations will actually increase your bottom line or if you have reached a point of diminishing returns.

The Core Formula

Calculating marginal revenue requires looking at the relationship between the change in revenue and the change in quantity sold. The standard formula used by economists and our calculator above is:

MR = 𝛥TR / 𝛥Q

Where:

  • MR = Marginal Revenue
  • 𝛥 TR = Change in Total Revenue (Final Revenue – Initial Revenue)
  • 𝛥 Q = Change in Quantity (Final Quantity – Initial Quantity)

The Profit Maximization Rule

You might wonder, “Why do I care about the revenue of just one unit?”

The answer lies in the Profit Maximization Rule. In microeconomics, a company maximizes its profit at the precise point where Marginal Revenue equals Marginal Cost (MR = MC).

  • If MR > MC: You are earning more on that extra unit than it costs to produce it. You should increase production.
  • If MR < MC: That extra unit cost you more to make than you sold it for. You are losing profit on the margin and should decrease production.
  • If MR = MC: You have hit the “sweet spot.” Your total profit is at its highest possible level.

Using this calculator allows you to track your revenue changes incrementally. By comparing these figures against your production costs, you can scientifically determine your optimal output level rather than guessing.

Example: The Coffee Shop Scenario

Imagine you own a specialized roastery.

  1. Scenario A: You sell 100 bags of coffee at $20 each. Your Total Revenue is $2,000.
  2. Scenario B: To sell more volume, you decide to lower the price slightly to $19. This strategy works, and you now sell 110 bags. Your new Total Revenue is $2,090.

Let’s plug this into the calculator:

  • Change in Revenue (𝛥 TR): $2,090 – $2,000 = $90
  • Change in Quantity (𝛥 Q): 110 – 100 = 10

Result: Your Marginal Revenue is $9.

Analysis: Even though you are selling the bags for $19, your marginal revenue for those extra 10 units is only $9 per unit. If it costs you $10 to produce a bag of coffee, you actually lost money on this expansion, despite your total revenue going up. This is the insight that protects businesses from unprofitable growth.

Marginal Revenue in Different Market Structures

The behavior of marginal revenue changes depending on the competitive landscape of your industry.

1. Perfect Competition

In a perfectly competitive market (where many firms sell identical products, like agricultural commodities), you have no control over the market price. Here, Marginal Revenue is equal to Price.

  • If the market price of corn is $5, every extra bushel you sell adds exactly $5 to your revenue. The MR curve is a horizontal line.

2. Monopoly or Imperfect Competition

Most businesses fall into this category. To sell more units, you usually have to lower the price, not just for the new customers, but often for everyone.

  • Here, Marginal Revenue is less than Price. As you lower prices to capture more volume, the revenue gained from new sales is partially offset by the revenue lost on previous units that are now sold at a discount. In this scenario, the MR curve slopes downward.

How to Use the VersaCalculator Tool

We designed this tool to be flexible. You don’t need to know every single variable to get an answer.

  • Calculate MR: Enter the Initial and Final values for both Revenue and Quantity. The tool will automatically calculate the differences and the final Marginal Revenue.
  • Find Missing Variables: If you already know your MR and want to forecast needed revenue changes, simply input the MR and the Quantity Change. The calculator works in reverse to find the missing Change in Revenue.

FAQs

Q1. Can Marginal Revenue be negative?

A: Yes. If you have to lower your price drastically to sell just one more unit, the total revenue might actually drop. If the revenue lost from the price cut outweighs the revenue gained from the new unit, MR becomes negative. This is a clear signal to stop expanding output.

Q2. Is Marginal Revenue the same as Average Revenue?

A: No. Average Revenue is simply Total Revenue / Total Quantity (which is usually the price per unit). Marginal Revenue looks strictly at the change occurring at the margin.

Q3. What is the Law of Diminishing Marginal Revenue?

A: This economic law states that as you add more resources (like labor or capital) to a fixed process, the additional output (and the revenue it brings) will eventually decline. It explains why the MR curve typically slopes downward as production scales up.

Sources: Omni Calculator, Calculator Online, Captain Calculator, Wall Street Prep, Calculator Planet, Elementor, Creative Widgets, MyMathTables, CalculatorSoup, AllWomenstalk.