Revenue increases with inelastic demand and price rise

Steps:

• Total revenue (TR) = price (P) × quantity (Q).
• Price elasticity of demand (|ε|) measures % change in Q relative to % change in P.
• If |ε| < 1 (inelastic), %ΔQ < %ΔP, so price rise boosts TR.
• If |ε| > 1 (elastic), %ΔQ > %ΔP, so price fall boosts TR.

Why C is correct:

• For inelastic demand (0 < |ε| < 1), a price increase causes quantity to fall by a smaller percentage than the price rise, increasing TR per the formula TR = P × Q.

Why the others are wrong:

• A: Price fall with inelastic demand causes quantity to rise less than proportionally, decreasing TR.
• B: Price fall with unitary elasticity (|ε| = 1) keeps TR unchanged.
• D: Price rise with elastic demand (|ε| > 1) causes quantity to fall more than proportionally, decreasing TR.

Final answer: C