WEEK 3
REVENUE CONCEPT
Revenue refers to the income derived by a producer or firm from business activities or from the sale of his or its products.
TYPES OF REVENUE
- TOTA REVENUE (TR): This refers to the total income which a firm derives from the sale of its products.
Total Revenue = Price x Quantity (TR = PxQ)
- AVERAGE REVENUE (A.R): The average revenue is the same as the price per unit of the commodity. It is derived by dividing the total revenue by the total unit of the commodity sold.
= = P
- Marginal revenue: This is the additional income earned by selling an extra unit of a commodity.
REVENUE SCHEDULE OF A FIRM
| Quantity sold (Output) | Total revenue (N) | Average Revenue (Unit Price) N | Napinal Revenue (N) |
| 0 | 0 | 0 | – |
| 1 | 400 | 400 | 400 |
| 2 | 700 | 350 | 300 |
| 3 | 900 | 300 | 200 |
| 4 | 1040 | 260 | 140 |
| 5 | 1150 | 230 | 110 |
| 6 | 1200 | 200 | 50 |
The most profitable output is the point where marginal cost is equal to marginal revenue.
ASSIGNMENT
TABLE OF A FIRM OF REVENUE AND COST
| Quantity of yams (kg) | Total Revenue (TR) N | Marginal Revenue (ML) N | Total Cost (TC) N | Marginal Cost (MC) N |
| 0 | 0 | – | 5 | – |
| 1 | 9 | 9 | 8 | 3 |
| 2 | 18 | 9 | 10 | 1 |
| 3 | 24 | 6 | 21 | 5 |
| 4 | 28 | Q | 25 | 4 |
| 5 | 30 | 2 | 25 | U |
| 6 | P | 1 | 25 | O |
| 7 | 28 | -3 | 25 | 1 |
| 8 | 24 | R | 24 | -2 |
Use the table to answer the following questions
- Complete the table by calculating the missing figures P, Q, R, S, T and U
- At what output is profit maximized
- Calculate the profit when the quantity sold is 5
- At what output does MC begins to rise