Task: 309.1.1.05, 06
In business there are certain factors that have to be evaluated before a company can see if a profit has been made. To even get to the point where a profit will be made there has to be a product that is sold whether it is a tangible or an intangible product. There has to be something that the business is selling in order to make that profit. The amount of profit that is attained is the outcome of the total revenue minus the total cost. This will then show the business what the remaining profit is. Business is like a puzzle, all the pieces have to fit and work together to have the puzzle complete. In business things have to work together or it won’t work and all the hard work that was put in to making a successful business is lost. To fully understand how a company makes a profit, certain areas need to be defined and shown the relationship between them to see how things work in business.
Define Marginal Revenue:
“Marginal Revenue is the change in total revenue that results from selling one more unit of output.” (McConnel, 2012) What this means is marginal revenue occurs when total revenue changes, whether it be higher or lower in production. Any change that occurs in total revenue is when marginal revenue takes place. Explain its relationship with Total Revenue:
First, total revenue needs to be defined. “Total revenue is the total number of dollars received by a firm from the sale of a product.” (McConnel, 2012) Total revenue is not the ending profit; it is the amount of money that was gained from selling the product or service to a customer. After the total revenue is received the profit will be the total revenue minus the total cost. The relationship between the two is that total revenue is the change that occurs in marginal revenue when one or more units of the goods or services are produced, whether the change that occurs is higher or lower. Any change in the quantity is usually when marginal revenue...