Legal Definitions - marginal revenue

Marginal revenue refers to the additional revenue earned from the sale of one more unit of a product or service.

• If a company sells 100 units of a product for $10 each and then sells 101 units for $9.50 each, the marginal revenue for the 101st unit is $9.50.
• A restaurant that sells 50 meals for $20 each and then sells 51 meals for $19 each has a marginal revenue of $19.

These examples show how marginal revenue is calculated by looking at the change in revenue from selling one additional unit. In both cases, the marginal revenue is lower than the previous unit's price because the company had to lower the price to sell the additional unit.