How To Calculate Marginal Revenue in PeopleSoft | Arithmix

Calculating marginal revenue can be a valuable tool for businesses looking to optimize their pricing strategies and increase profits. Marginal revenue is the additional revenue generated by selling one more unit of a product or service. In other words, it is the change in total revenue that results from a change in the quantity sold.

What Is Marginal Revenue?

Marginal revenue is a concept that is closely related to marginal cost, which is the additional cost incurred by producing one more unit of a product or service. By comparing marginal revenue to marginal cost, businesses can determine the optimal quantity to produce and sell in order to maximize profits.

Calculating marginal revenue requires a basic understanding of the relationship between price and quantity. In general, as the price of a product or service increases, the quantity demanded decreases. This is known as the law of demand. Marginal revenue takes into account the fact that each additional unit sold will have a lower price than the previous unit, due to the downward sloping demand curve.

For example, let's say a business sells a product for $10 per unit and currently sells 100 units per month, generating total revenue of $1,000. If the business were to increase the price to $11 per unit, it would likely sell fewer units, say 90 units per month. The marginal revenue of the 90th unit would be $1, as it is the additional revenue generated by selling that unit. However, the marginal revenue of the 101st unit would be negative, as the business would have to lower the price in order to sell that additional unit.

When Is It Valuable To Calculate Marginal Revenue?

Calculating marginal revenue can be particularly valuable for businesses that operate in competitive markets or that offer multiple products or services with different prices and costs. By understanding the relationship between price and quantity, businesses can adjust their pricing strategies to maximize profits.

For example, a business may find that it can increase profits by lowering the price of a product that has a high marginal cost but a relatively elastic demand curve. This would increase the quantity sold and generate additional revenue that exceeds the decrease in price. On the other hand, a business may find that it can increase profits by raising the price of a product that has a low marginal cost but a relatively inelastic demand curve. This would generate additional revenue without significantly reducing the quantity sold.

Overall, calculating marginal revenue can be a powerful tool for businesses looking to optimize their pricing strategies and increase profits. By understanding the relationship between price and quantity, businesses can make informed decisions about how to price their products and services in order to maximize revenue and profits.

How Do You Calculate Marginal Revenue in PeopleSoft

PeopleSoft itself isn’t naturally geared towards letting you calculate complex metrics like Marginal Revenue. As an alternative, teams typically use products like Arithmix to import data from PeopleSoft and build out dashboards.

What is Arithmix?

Arithmix is the next generation spreadsheet - a collaborative, web-based platform for working with numbers that’s powerful yet easy to use. With Arithmix you can import data from systems like PeopleSoft, combine it with data from other systems, and create calculations like Marginal Revenue.

In Arithmix, data is organized into Tables and referenced by name, not by cell location like a spreadsheet, simplifying calculation creation. Data and calculations can be shared with others and re-used like building blocks, vastly streamlining analysis, model building, and reporting in a highly scalable and easy to maintain platform. Data can be edited, categorized (by dimensions) and freely pivoted. Calculations are automatically copied across a dimension - eliminating copy and paste of formulas.

Arithmix is fully collaborative, giving your entire team access to your numbers and the ability to work together seamlessly.

Calculating Marginal Revenue in Arithmix

Calculating metrics like Marginal Revenue is simple in Arithmix. Once you've created your free account, you’ll be able to import your PeopleSoft data, and use it to create natural language formulas for metrics like Marginal Revenue.

Arithmix is designed to give you the power to build any calculations you want on top of your PeopleSoft data, while also being easy to use and collaborate on. You can share your dashboards with users inside and outside of your organisation, making it easy to empower your whole team.