Total Revenue

Total revenue refers to the monetary amount (economic revenue) a firm earns by selling a quantity q of a product at a unit price p. For any given product, the firm’s total revenue (TR) can therefore be expressed as the product of the quantity sold (q) and the unit price (p).

TR = p · q

Graphically, total revenue can be illustrated on a Cartesian plane, with total revenue (TR) on the vertical axis and the quantity of product sold (q) on the horizontal axis. In a perfectly competitive market, the total revenue curve is a straight, upward-sloping line with a slope equal to the price (p). The line passes through the origin, since if no units are sold (q = 0), total revenue (TR) is zero. The function is strictly increasing: as the quantity sold rises (ΔQ), total revenue (ΔTR) increases proportionally.

In a perfectly competitive market, firms do not set the selling price; rather, they choose the quantity to sell - they are price takers. In this context, the market price (p) is determined by the equilibrium between supply and demand. Under perfect competition, variations in the quantity sold or produced (q) have no impact on the selling price (p), which remains constant. Consequently, in a perfectly competitive market, the total revenue curve is a straight line whose slope equals the market price.