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  • Inverse Demand Function: Price as a Function of Quantity

  • Graphical Representation of Demand and Marginal Cost for Beautiful Cars

Total Revenue and the Revenue Function

A firm's total revenue is calculated by multiplying the price per unit (P) by the quantity of units sold (Q), following the formula R=P×QR = P \times Q. [4] By utilizing the inverse demand function, P=f(Q)P=f(Q), which indicates the highest price at which a quantity Q can be sold, revenue can be expressed purely as a function of quantity. [2] This is referred to as the revenue function, R(Q)R(Q). On a price-quantity graph, the total revenue is visually represented by the rectangular area corresponding to a specific price and quantity on the demand curve.

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Introduction to Microeconomics Course

The Economy 2.0 Microeconomics @ CORE Econ

Ch.7 The firm and its customers - The Economy 2.0 Microeconomics @ CORE Econ

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Learn After

  • Visualizing a Firm's Revenue Under Two Demand Scenarios

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  • A firm sells a particular product. When the price is set at $50 per unit, the firm sells 200 units. If the firm lowers the price to $45 per unit, it finds it can sell 240 units. Based on this information, how does the firm's total revenue change as a result of the price reduction?

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  • A firm faces an inverse demand function of P = 200 - 4Q, where P is the price per unit and Q is the quantity sold. The firm currently sells 25 units at a price of $80 per unit. Which statement provides the most accurate evaluation of the firm's revenue strategy at this level of output?

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