Calculate revenue optimization and pricing strategy metrics
Marginal Revenue (MR): The additional revenue generated by selling one more unit. Formula: MR = ΔTR / ΔQ
Average Revenue (AR): Total revenue divided by quantity sold, which equals the price per unit.
Economic Significance: In perfect competition, MR = Price. In monopoly, MR < Price due to price reduction needed to sell more.
Profit Maximization: Firms maximize profit where Marginal Revenue equals Marginal Cost (MR = MC).
Price Elasticity: When demand is elastic, reducing price increases total revenue. When inelastic, reducing price decreases total revenue.