What is marginal revenue and how is it used in price decisions?

Marginal revenue is the extra money you earn from selling one additional unit after accounting for any discounts or concessions tied to that sale. When marginal revenue exceeds marginal cost, the transaction adds profit. Therefore, pricing teams compare the two curves to spot the quantity where the gap peaks. If lowering the price improves volume enough to keep marginal revenue above cost, the cut makes sense; if not, hold or raise. In subscription businesses, the same logic applies to seat expansions and tier upgrades.