How does total revenue impact elasticity?

Total revenue is closely related to the price elasticity of demand. When demand is elastic, a decrease in price leads to an increase in total revenue, as the percentage increase in quantity sold outweighs the price drop. Conversely, when demand is inelastic, a decrease in price results in a decrease in total revenue, as the quantity sold does not increase enough to offset the lower price. Thus, understanding the elasticity of demand helps businesses make informed pricing decisions to optimize revenue.