Incremental profit vs. incremental revenue: What’s the difference?
Asked a year ago
Hi all, I have seen both the terms incremental revenue and incremental profit being used online. What are the differences between these terms? I've also heard the term marginal revenue being used, is this something different? Any help would be appreciated.
Abeeha Qasmi
Wednesday, January 18, 2023
Incremental profit and incremental revenue may appear similar, but they are two different terminologies.
Incremental profit refers to the money a business makes due to a specific change or decision. For instance, increasing product prices or introducing a new product. On the contrary, incremental revenue is the additional revenue earned from that same change or decision.
The incremental profit takes into account the incremental costs. In simpler terms, incremental profit is incremental revenue minus incremental costs.
Note: To avoid confusion, it is important to note that both terms are often used interchangeably despite their distinct focus.
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