DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : P. Sankara Rao
Designation : Lecturer
Branch : Commercial & Computer Practice
Institute : Govt. Polytechnic, Srikakulam
Year/Semester : V Semester
Subject : Business Economics I
Subject Code : CCP 502
Topic : Cost & Revenue Analysis
Duration : 50 mts.
Sub Topic :Types of Revenue
Teaching Aids : PPT & Animation

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Objectives
On completion of this period, you would be able to:

 Understand the meaning of revenue

 Identify various types of revenue

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Introduction

The revenue of a firm together with its costs

determines profits. The term ‘revenue’ refers to the
receipts obtained by a firm from the sales of certain
quantities of a commodities at various prices.

CCP 502.53 3
Types of Revenue
There are three types of revenue, namely:

1. Total revenue

2. Average revenue

3. Marginal revenue

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Total Revenue

Total revenue is the total sale proceeds of a firm

by selling a commodity at a given price.

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Example:
If a firm sells 2 units of a commodity at Rs. 18,
Total revenue is 2 x 18=36/- .Thus, total revenue is
obtained by multiplying the price per unit with the
number of units sold.
i.e. R=P XQ
Where R is the total revenue
P is the price
Q is the quantity

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Average Revenue

Average revenue is the average receipts from the

sale of certain units of the commodity. It is found out
by dividing the total revenue by the number of units

sold.

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 In our previous example, average revenue is
36/2= Rs. 18. The average revenue of a firm is,
infact the price of the commodity at each level of
output since R= P X Q.

Therefore:
Average revenue =R/Q

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Marginal Revenue
Marginal revenue is the addition to total
revenue as a result of a small increase in the sale
of a firm. Algebraically, M is the addition to R by
selling n+1 units instead of n units.
dR
M=
dQ
Where d represents a change

CCP 502.53 9
Questions
 Define revenue

 Explain various types of revenue with examples

 Distinguish between Marginal revenue and

Average revenue

CCP 502.53 10
Summary

In this session we have learned

 Meaning of Revenue
 Types of Revenue

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