How to Use This Calculator
- 1
Enter Current Revenue and Quantity
Input total revenue and units sold at your current production level. These form the baseline for calculating marginal revenue.
- 2
Enter Next Revenue and Quantity
Input the projected total revenue and units sold after increasing production. The calculator computes MR from the change in revenue divided by the change in quantity.
- 3
Review MR and Insights
See Marginal Revenue per unit, average revenue before and after the change, and whether MR is above or below average (indicating pricing power or diminishing returns). The Insights panel shows MR vs average revenue, price dilution analysis, and your profit threshold.
Example Calculation
A manufacturer currently sells 1,000 units for $50,000 in revenue. They project selling 1,100 units for $52,000.
Total Revenue (Current)
$50,000
Total Revenue (Next)
$52,000
Quantity Sold (Current)
1,000
Quantity Sold (Next)
1,100
Results
Marginal Revenue
$20.00
Avg Revenue (Before)
$50.00
Avg Revenue (After)
$47.27
Insights card shows MR of $20 is 60% below avg revenue of $50 (diminishing returns), avg revenue dropped $2.
Tips
Check MR vs Average in the Insights Panel
The Insights panel compares MR to your current average revenue. MR of $20 vs avg of $50 means new units generate 60% less than existing ones — a clear sign of diminishing returns. If MR exceeds average, you have untapped pricing power.
Watch for Price Dilution
The Insights panel shows whether your per-unit revenue is declining. In the default example, avg revenue drops from $50 to $47.27 — you're selling more units but at lower effective prices. This matters for long-term pricing strategy.
Use the Profit Threshold
MR tells you the maximum marginal cost you can afford. At MR = $20, any per-unit variable cost above $20 means additional units lose money. Compare against your actual production, fulfillment, and variable costs.
Compare Against Marginal Cost
The optimal output is where MR = MC. If MR ($20) > MC ($15), produce more. If MR ($20) < MC ($25), produce less. Use our Marginal Cost Calculator alongside this tool for complete analysis.
Calculating the Revenue Impact of Additional Sales
The Marginal Revenue Calculator determines how much additional revenue each new unit generates.
Enter your current and projected revenue and quantity figures to find MR, compare it against average revenue, and assess whether expanding production is financially sound.
The Insights panel shows whether MR indicates pricing power or diminishing returns, flags price dilution, and identifies your profit threshold — the maximum marginal cost where additional units remain profitable.
The Marginal Revenue Formula
MR = (Revenue_new - Revenue_current) / (Quantity_new - Quantity_current)
= Change in Total Revenue / Change in Quantity
MR compared to average revenue reveals your pricing dynamics:
- MR > Average: Each new unit is more valuable — pricing power or premium positioning
- MR = Average: Perfectly efficient scaling — constant returns
- MR < Average: Diminishing returns — new units dilute per-unit revenue
- MR < 0: Additional units reduce total revenue — overproduction
Worked Example: 1,000 to 1,100 Units
A manufacturer sells 1,000 units for $50,000 total revenue.
They project selling 1,100 units for $52,000.
- Change in Revenue: $52,000 - $50,000 = $2,000
- Change in Quantity: 1,100 - 1,000 = 100 units
- Marginal Revenue: $2,000 / 100 = $20.00 per unit
- Avg Revenue (Before): $50,000 / 1,000 = $50.00 per unit
- Avg Revenue (After): $52,000 / 1,100 = $47.27 per unit
Analysis: MR of $20 is 60% below the current average of $50.
Average revenue drops $2.73/unit (-5.5%), indicating price dilution.
The 100 additional units add only $2,000 in revenue — $20 each vs. the $50 average for existing units.
If marginal cost exceeds $20, those additional units lose money.
MR Across Different Scenarios
| Scenario | Revenue Change | Qty Change | MR | Signal |
|---|---|---|---|---|
| Strong pricing power | $50K → $56K | 1,000 → 1,100 | $60 | MR > Avg ($50) — expand |
| Moderate returns | $50K → $52K | 1,000 → 1,100 | $20 | MR < Avg — diminishing returns |
| Break-even expansion | $50K → $50K | 1,000 → 1,100 | $0 | No revenue gain from more units |
| Revenue destruction | $50K → $48K | 1,000 → 1,100 | -$20 | Reduce production immediately |
The key decision: compare MR against marginal cost.
MR of $20 is profitable if MC < $20, unprofitable if MC > $20.
Marginal Revenue in Practice
E-commerce/FMCG: MR typically $5-$20/unit with tight margins and high volume.
Watch for MR declining as you saturate your addressable market or increase ad spend with diminishing click-through rates.
SaaS subscriptions: MR per new subscriber often $50-$500/month with near-zero marginal costs, making MR almost entirely profit.
Focus on customer acquisition cost vs. MR.
Manufacturing: MR ranges $100-$10,000+ per unit for specialized equipment.
Compare MR against material, labor, and tooling costs for each incremental batch.
Frequently Asked Questions
What is marginal revenue?
Marginal revenue is the additional revenue from selling one more unit. It's calculated as Change in Revenue / Change in Quantity. For 1,000 units at $50,000 revenue increasing to 1,100 units at $52,000: MR = ($52,000 - $50,000) / (1,100 - 1,000) = $20 per unit. This means each additional unit adds $20 to total revenue.
Why is my marginal revenue below average revenue?
MR below average revenue indicates diminishing returns — new units generate less revenue than existing ones. This typically happens when you must lower prices to sell more, diluting per-unit revenue. In the default example, MR ($20) is 60% below avg ($50) because selling 100 more units only adds $2,000, while the avg unit earns $50.
When is marginal revenue negative?
MR turns negative when total revenue decreases despite selling more units. This happens when price cuts needed to move additional inventory outweigh the revenue from those extra sales. Example: selling 100 units at $10 ($1,000 revenue) vs. 110 units at $8.50 ($935 revenue) gives MR = -$6.50 per unit.
How do I use marginal revenue to set production levels?
Produce more when MR exceeds marginal cost (MC) — each additional unit adds profit. Stop expanding when MR = MC — that's the profit-maximizing output. Reduce production when MR < MC — additional units lose money. At MR = $20, your marginal cost must be below $20 for expansion to be profitable.
Is marginal revenue the same as profit per unit?
No. MR is additional revenue per unit, not profit. Profit per additional unit = MR - Marginal Cost. If MR = $20 and MC = $15, profit per additional unit is $5. If MC = $25, you lose $5 per additional unit despite positive MR. Always compare MR against costs.