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Definition of Marginal Revenue Ratio

Definition: What is Marginal Revenue Ratio?

Marginal Revenue is the financial ratio that measures the change in the overall income resulting from the sale of one additional product or unit. It is the income earning from the last unit sold.

Definition of Marginal Revenue Ratio

For analyzing the consumer demand, plan production schedules, and for the setting of product price management use Marginal Revenue. For the manufacturers, these 3 key concepts are so crucial.

If the products get shortage then the consumer may be a move to the other companies which is the negative point for the company so for management it is necessary to fulfil the consumer demand in time.

If the company increase the profit on its products it is profitable for the company at that time but due to this if the customer moves to the competitors of the company then the company got the heavy loss so for the company set the price is necessary.

At the time of analyzing MR, management considers all the above scenarios.

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