Price Elasticity of Demand and Total Revenue:

Total Revenue (TR) is the product of a commodity's market price (P) and the quantity of the commodity purchased   (Q):

Total Revenue (TR) = Price (P) x Qauntity purchased (Q)

The net effect of a price change on total revenue is determined by the size of the change is relative to the size of the change in quantity demanded or the price elasticity of demand for the goods.  If demand is elastic, a fall in price increases the toal revenue whilst a rise in the price reduces total revenue.

a) If demand is inelastic, a fall in price reduces total revenue whilst a rise in price creases total revenue.

b) If demand is unit elastic, a change in price (either a fall or a rise) dies not affect total revenue).