The answer is: Revenue is the total amount producers receive after selling a good. Profit is the total amount producers earn after subtracting the production costs.
To understand this let's take a look the case example.
Let's say you want to open a lemonade stand.
To make 1 glass of lemonade, you need to buy materials consisting of water + lemon + sugar + ice. For these, you need to spend 50 cent.
You sold that lemonade for $ 1 per Glass.
If you sell 10 glasses.
- You need to spend $5 for materials (50 cent x 10). This $ 5 represent the production costs.
- You would obtain $ 10 from the sales ($1 x 10). This $10 represent your revenue.
- Since your revenue is larger than your cost, you would have more money compared to when you start the business.
you would have an increase of: $10 - $ 5 = $ 5. This number represent your Profit.
