The demand function The first step in the process of coming up with a marginal revenue derivative is to estimate the demand function.

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Marginal revenue is the incremental gain produced by selling an additional unit. It follows the law of diminishing returns, eroding as output levels increase.

Calculate marginal revenue by dividing the added revenue from that one extra sale by the change in quantity sold.

Marginal profit is the increase in profits resulting from the production of one additional unit. Marginal profit is calculated by taking the difference between marginal revenue and marginal cost.