A price decrease will cause total revenue to fall if the demand
is inelastic.
A demand is said to be elastic if it is highly responsive to
the rise in prices. Total revenue can be used as a test to
determine whether a demand is inelastic or elastic.
If a decrease in price leads to a fall in total revenue we can
say that a particular goods demand is highly inelastic. This is
because the fall in price does not seem to affect the consumer's
demand.
Their demand does not increase even when a goods price falls.
Thus the firms earn lower revenues than expected.