Costs & Revenue | A-Level Economics Notes

These revision notes cover everything you need to know about Revenue and Costs for A-Level Economics. They're designed for students studying AQA A-Level Economics, Edexcel A-Level Economics, and Edexcel International A-Level Economics. Written by Jaisul Naik, UCL Economics graduate and A-Level Economics tutor since 2017.

What is total revenue?

Total revenue = price x quantity

What is average revenue?

Average revenue = total revenue/quantity

Average revenue = price x quantity/quantity = price

What is marginal revenue?

Marginal revenue is the change in total revenue from selling one extra unit.

Marginal revenue = Change in total revenue/ change in output.

Marginal revenue is always twice as steep as average revenue.

What is the relationship between PED, price and total revenue?

If a good is price inelastic in demand, firms can increase their prices and their total revenue will also increase. This is because if price goes up by 10%, demand will fall by less than 10%.

If a good is price elastic in demand, firms can raise their prices but their total revenue would decrease.

What is total cost?

Total cost = total fixed cost + total variable cost

What is total fixed cost?

Fixed costs do not change even if output increases e.g rent

What is total variable cost?

Total variable costs increase when output increases e.g. wages/ raw materials