What are the overall income?
The company's goal is to maximize their profits by selling products or services and generating the highest level of income at the lowest possible costs. The total cash value of all sales of the company is called total income. It is calculated by multiplying the number of units of the product or services that were sold according to the amount charged for each of these units.
The volume of the units sold and the total revenue is powered by market demand. Along with factors such as the quality of the product or service and competition on the market, the demand for a particular product or service is influenced by its price. As the price increases, demand generally decreases and as the price decreases, demand usually increases. This economic pressure and thrust leads to what is called the elasticity of demand. If there is a strong correlation between price and demand, the price changes will cause a significant change in demand. Assessment of the elasticity of demand will help the company determine the final price point and has a direct relation to the concept of marginal income.
The marginal income is a change in the total income obtained from the last additional unit sold. If the company works in a competitive market environment and found that the demand for its goods or services is flexible, then the marginal income that the company would receive for the sale of one additional unit of goods or services, would remain constant or unchanged. If society was acting with a non -non -selastic demand or in a monopolistic or mixed economy, it would find that its total income would be negatively affected by the main price reduction that would have to use demand and maximizing profits.