Revenue and its types

As the income in a market economy is the amount of money received by a private individual, a corporation or a national economy over a certain period of time (usually a year) and provide for the acquisition of goods and services.

Types of income:

- Total revenue - is the result of multiplying the unit price and its corresponding number:

TR= P x Q

- Average revenue - income from a unit of production (i.e., the price per unit of output) is determined by dividing gross income by the number of products:

АR = ТR

Q

- Marginal revenue - additional income, which is the result of selling one additional unit of output:

МR= ТR

Q

Sources of cash revenue:

1. Salary;

2. Property revenue (dividends, interest, rents, profits, etc.);

3. Transfer payments to the state or social benefits (pensions, unemployment benefits, etc.).

In a market economy, there is inequality in income distribution, which is measured by the Lorenz curve, and expresses the degree of inequality, the Ginny coefficient.

The fact that the owners of the factors of production are the revenue, the buyers of these factors is the costs. Factor prices under perfect competition are determined by supply and demand.

The size of the demand for each factor depends not only on the level of prices for this factor, but also on the prices of other resources. When the price of a certain factor increases, demand will fall and the demand for the other factor will increase.

For example, a higher price for labor will lead to the replacement of its machines. The possibility of mutual substitution of factors of production allows combining them in a ratio that provides the lowest production costs and highest profits.

The elasticity of demand for each particular factor of production can vary depending on:

- The level of income of the company and the demand for its manufactured products;

- Mutual substitution possibilities used in the production of resources;

- The availability of markets interchangeable and complementary inputs at affordable prices;

- The desire to innovate, etc.