Question

How is total revenue increased when demand is elastic?

If an increase in price causes an increase in total revenue, demand is said to be inelastic and if an increase in price causes a decrease in total revenue, then demand is said to be elastic… There’s no way for total revenue to increase when demand is elastic, right?

Answer 1

There is actually.

An elastic demand means simply that if the price increase the demand will respond in a greater change. So, if the price decrease the demand will increase more and that will increase total revenue because total revenue is just price x quantity here the increase in the quantity is more than the decrease in price so total revenue will be higher.

Just opposite will happen if the price rise for a elastic good. If the price increase the demand will decrease, the increase in price will be lower than the change in demand that will decrease the revenue.