The relationship between marginal revenue and total revenue
When marginal revenue — the extra income from selling one more unit — is positive, total revenue rises. When marginal revenue turns negative, total revenue falls.
Formula
TR is maximised when MR = 0
Real World
When Apple reduced the price of older iPhone models, total revenue from those models initially rose (MR still positive), but if it cut prices too far — past the point where MR hit zero — total revenue would begin to fall.
Exam Focus
Always link the sign of MR to the direction TR is moving — examiners look for this causal chain, not just the conclusion.
Price Elasticity of Demand
PED = % change in quantity demanded ÷ % change in price
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