Total revenue on a graph is represented by the area of a rectangle formed by the price level and the quantity sold. If the price is on the vertical axis and quantity is on the horizontal axis, you find total revenue by identifying the rectangle that stretches from the origin to the quantity sold along the bottom, up to the price level, and back to the vertical axis. The area of that rectangle (price × quantity) is your total revenue.
The Rectangle Method on a Supply and Demand Graph
Most economics graphs place price on the vertical (y) axis and quantity on the horizontal (x) axis. To find total revenue at any given price-quantity combination, you’re looking for a rectangle with four corners: the origin (0,0), the quantity on the x-axis, the price on the y-axis, and the point where price and quantity meet on or below the demand curve.
Say a firm sells 90 units at $5 each. The rectangle starts at the origin, extends right along the x-axis to 90, rises vertically to $5, then runs horizontally back to the y-axis. The area of that rectangle is 90 × $5 = $450 in total revenue. On a printed graph, this rectangle is often shaded or outlined to make it easy to spot.
This works because total revenue is simply price multiplied by quantity. A rectangle’s area is base times height, and on a price-quantity graph, the base is quantity and the height is price. The two calculations are identical.
Reading Total Revenue From a Demand Curve
When you’re given a downward-sloping demand curve, total revenue at any point along it equals the area of the rectangle sitting underneath that point. Pick a point on the demand curve, drop a vertical line to the x-axis to find the quantity, and draw a horizontal line to the y-axis to find the price. The rectangle you’ve just outlined represents total revenue.
As you move along the demand curve, the shape of that rectangle changes. At a high price and low quantity, the rectangle is tall and narrow. At a low price and high quantity, it’s short and wide. Total revenue is highest at the point where the rectangle’s area is maximized, which corresponds to the midpoint of a linear demand curve.
How Elasticity Affects the Revenue Rectangle
Whether total revenue grows or shrinks as you lower the price depends on the elasticity of demand at that point on the curve. Elasticity measures how sensitive buyers are to price changes.
When demand is elastic (buyers are very responsive to price), lowering the price increases quantity sold by a larger proportion than the price drop. The rectangle gets wider faster than it gets shorter, so total revenue rises. When demand is inelastic (buyers are less responsive), cutting the price adds relatively few new sales. The rectangle gets shorter faster than it gets wider, and total revenue falls.
You can see this visually by comparing the rectangles at two different price points. If the new rectangle has a larger area than the old one, revenue increased. If the area shrank, revenue decreased. At the exact point where demand switches from elastic to inelastic, total revenue is at its peak.
Finding Total Revenue on a Total Revenue Curve
Some graphs plot total revenue directly rather than showing price and quantity. On these graphs, quantity is on the x-axis and total revenue (in dollars) is on the y-axis. The curve typically rises, reaches a peak, and then falls as quantity continues to increase.
Reading this type of graph is straightforward. Pick a quantity on the x-axis, trace straight up to the curve, then move horizontally to the y-axis. The value you hit on the y-axis is total revenue at that quantity. The highest point on the curve is maximum total revenue.
Using the Marginal Revenue Curve
If you’re given a marginal revenue curve instead, total revenue at a given quantity equals the area under that curve from zero up to that quantity. Marginal revenue represents the additional revenue earned from selling one more unit. Adding up all those increments from the first unit to the last gives you total revenue.
On the graph, this means shading the entire region below the marginal revenue line (or curve) and above the x-axis, from the origin to your chosen quantity. For a firm in perfect competition, marginal revenue is a flat horizontal line equal to the market price, so the area underneath it is simply a rectangle (price × quantity), which brings you right back to the rectangle method.
Separating Revenue From Profit on a Graph
Graphs that show both revenue and cost can be confusing if you don’t know which rectangle is which. Total revenue is the larger rectangle defined by price and quantity. Total cost is a separate rectangle defined by average cost and quantity. Profit is the difference between the two.
For example, if a firm sells 90 units at $5 and the average cost per unit is $3.50, the total revenue rectangle has an area of $450 (90 × $5) and the total cost rectangle has an area of $315 (90 × $3.50). Profit is the remaining strip on top: $135. On most textbook graphs, the profit area is shaded in a different color so you can distinguish it from the full revenue rectangle beneath it.
If the average cost rectangle is taller than the price, meaning average cost exceeds the selling price, the firm is operating at a loss. The shaded area between the two rectangles then represents negative profit rather than positive profit.
Revenue on Business and Data Charts
Outside of economics courses, total revenue often appears on simple line charts or bar charts in business dashboards and financial reports. These typically place time (months, quarters, years) on the x-axis and dollar amounts on the y-axis. Each data point or bar height represents total revenue for that period.
To read total revenue from these charts, find the time period you care about on the x-axis, then trace up to the data point or top of the bar and read across to the y-axis for the dollar figure. If the chart includes multiple lines (revenue, cost, profit), check the legend or series labels to confirm which line represents revenue. Some charts use a secondary y-axis on the right side when revenue and another metric are on very different scales, so verify which axis corresponds to which line before reading values.