What is the formula for calculating total revenue?

Total revenue is calculated by multiplying the price at which a good is sold by the quantity of that good sold. This relationship is fundamental in microeconomics because it helps businesses assess their sales performance and revenue generation capability.

When you multiply price by quantity demanded, you capture the total monetary amount that consumers are willing to pay for a certain number of units of a product. This formula is essential for businesses to understand the economic viability of their operations and pricing strategies.

The other options do not accurately represent the formula for total revenue. Simply dividing price by quantity sold does not provide the total revenue figure. Adding quantity demanded to quantity supplied does not relate directly to revenue at all; it pertains more to the market equilibrium in terms of supply and demand. Lastly, subtracting cost from price gives you profit per unit, not the total revenue. Thus, the multiplication of price by quantity demanded accurately defines total revenue, which is crucial for understanding financial performance.