Calculate the revenue-maximizing price and quantity from demand points, inverse demand, direct demand, or a quadratic revenue function.
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Maximum Revenue Formula
The formula for calculating the maximum revenue of an object is as follows:
R = p*Q
- Where R is the maximum revenue
- p is the price of the good or service at max demand
- Q is the total quantity of goods at maximum demand
To calculate a maximum revenue, multiply the price of goods at maximum demand by the quantity of goods at maximum demand.
Determine the maximum demand of a good and the price and that level is a little more difficult. It involves taking the derivative of a function. For more information on this, visit our price elasticity of demand calculator.
- Where p is price
- and q is the theoretical demand at max price
Maximum Revenue Definition
Maximum revenue is defined as the total maximum amount of revenue of product or service can yield at maximum demand and price.
FAQ
The maximum revenue of an item is the total revenue generated at the maximum demand and maximum price.
Using the price elasticity of demand, you can better understand how demand changes with changes in the price of a good or service.
How to calculate maximum revenue?
- First, determine the total price at maximum demand.
As referenced earlier, analyze the price elasticity of demand and determine the maximum demand at the highest price possible.
- Next, determine the maximum demand quantity.
Determine the number of goods sold at the price from step 1.
- Finally, calculate the maximum revenue.
Using the formula above, calculate the maximum revenue.
