Demand Shift Overrides Elasticity Effect

Steps:

• Elastic demand implies a price rise alone decreases total revenue, as quantity falls more than price rises.
• Observed revenue increase with price rise indicates an external factor boosting sales.
• Increased demand shifts the demand curve rightward, raising both equilibrium price and quantity.
• Higher price and quantity together increase total revenue, despite elastic demand.

Why B is correct:

• Total revenue (TR = P × Q) rises when demand increases because it elevates both price and quantity, per the law of demand and market equilibrium.

Why the others are wrong:

• A: Inferior good status affects income elasticity, not the price elasticity or revenue response to price changes.
• C: Inelastic supply amplifies price rises from demand shifts but doesn't explain revenue growth in elastic demand scenarios.
• D: Price-inelastic supply limits quantity response to price but fails to address why quantity (and thus revenue) increases here.

Final answer: B