Marginal Revenue

Marginal revenue is the additional income a business earns from selling one more unit of its product or service. It reflects how total revenue changes when sales increase by one unit. For most businesses, marginal revenue decreases as they sell more units, especially if they need to lower prices to attract additional buyers. Understanding marginal revenue helps companies determine the most profitable level of production and sales, ensuring they don’t produce more than they should once revenue from extra sales no longer covers the costs involved.