In the context of economics, revenue refers to the total income that a firm receives from its normal business activities or other sources during a specific period, usually measured in monetary terms. It is a crucial concept for understanding the financial performance of businesses. Thus revenue is Money received by selling product by producer is called Revenue.
How to calculate Revenue
Revenue = Profit + Cost.
Marginal revenue (MR) is a concept in economics that represents the additional revenue generated by producing and selling one more unit of a good or service. In other words, It is the Change in Total Revenue by selling one more or less unit of output.
MR = TRn – TRn-1
Average Revenue
Average revenue (AR) is the revenue generated per unit of output sold by a firm. It is calculated by dividing the total revenue (TR) by the quantity of output (Q) sold:
AR = total Revenue / Quantity
Revenue curve in different markets
Monopoly
Under monopoly, the average revenue curve and marginal revenue curve of the firm both slope downwards from left to right. If a monopolist wants to sell more units of a commodity, they have to reduce the price in spite of being a price maker. He can inflate the prices as much as he wants but only up to a certain extent. He can sell more units of goods only when he resorts to reducing the price. This is in sync with the law of demand as well. The AR and MR curve are shown below:
Perfect competitive Market
Under a Perfect Competition, a firm is a price taker not a price maker. The firms have to sell products at a specific price that is prevailing in the market. If an individual firm tries to charge more for a commodity, the customers will go to another firm, so eventually the firm may lose its customer. So, in a perfect competition, fixed price leads to constant AR and the marginal revenue is also equal to Average revenue, AR=MR the diagram shown below:
Monopolistic Competition
Under monopolistic competition, both AR and MR curves slope downward from left to right. The key difference between monopoly and monopolistic is that under monopolistic competition AR and MR are more elastic. Thus, in response to a change in price, the demand will change relatively more for a monopolistic competitive firm than the monopoly firm. This happens because there are close substitutes available under monopolistic competition, on the other hand, under monopoly there are no close substitute available. The diagram shown below of AR and MR under monopolistic: