Marginal revenue is the additional revenue generated by the sale of one extra unit. The concept is frequently used to determine whether special pricing deals are worthwhile. For example, a business can sell 10 units for a total of $100, which is $10 each. A customer offers to buy 11 units if the total price is reduced to $108. This means that the marginal revenue associated with the extra unit sold is $8.
As sales increase, marginal revenue is likely to gradually decline. A business would continue to accept lower marginal revenue levels until the marginal revenue equals marginal cost.