Economics, 3rd Edition

88  PART 2  SUPPLY AND DEMAND: HOW MARKETS WORK

Total Revenue and the Price Elasticity of Supply

When studying changes in supply in a market we are often interested in the resulting changes in the 

total revenue

 received by producers. In any market, total revenue received by sellers is P 

× Q, the 

price of the good times the quantity of the good sold. This is highlighted in Figure 4.8, which shows 

an upward sloping supply curve with an assumed price of 

€5 and a supply of 100 units. The height 

of the box under the demand curve is P and the width is Q. The area of this box, P 

× Q, equals the 

total  revenue received in this market. In Figure 4.8, where P 

= €5 and Q = 100, total expenditure is 

€5 × 100 or €500.

total revenue

 the amount received by sellers of a good, computed as the price of the good times the quantity sold