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A firmís revenue is calculated using the following formula:

            volume of goods sold  ī  average selling price


A firm wanting to increase its revenue could raise the price or sell more units.  Remember that raising the price of an elastic good will lead to a reduction in revenue and raising the price of an inelastic good will lead to an increase in revenue.


Firms will often adopt one of two approaches:

  • Sell at a low price hoping to attract a high level of sales.
  • Sell at a high price in order to maximise the revenue from the items sold.



E-mail Steve Margetts