PED + Revenue

• The elasticity of demand is crucial for businesses when making pricing decisions to increase their total revenue.
• The equation for total revenue is P times Q, where P is the price of the good or service and Q is the quantity sold.
• If a business knows that demand for their good is price elastic, whatever they do with price will result in the opposite happening with total revenue.
• If demand is price inelastic, whatever the business does with price is going to have the same effect on total revenue.
• If demand is price elastic, reducing price will increase total revenue.
• If demand is price inelastic, increasing price will increase total revenue.
• If demand is price inelastic, reducing price will decrease total revenue.
• If demand is price elastic, increasing price will decrease total revenue.
• If demand is price inelastic, dropping price will decrease total revenue.
• If demand is price elastic, dropping price will increase total revenue.
• If demand is price inelastic, dropping price will increase total revenue.