Answer:
If the price elasticity of demand is elastic, if the price decreases, total revenue will increase.
E.g. a product has a PED of 1.5, and 1,000 units are sold at $10 per unit, total revenue = $10,000.
If the price decreases by 10% to $9 per unit, the quantity demanded will increase to 1,150 units, and total revenue will increase to $10,350.
On the other hand, if the price elasticity of demand is inelastic, if the price increases, total revenue will increase.
E.g. the same product but with a PED of 0.5, and 1,000 units are sold at $10 per unit, total revenue = $10,000.
If the price increases by 10% to $11 per unit, the quantity demanded will decrease to 950 units, and total revenue will increase to $10,450.
A real world example that involves an extremely inelastic good is gasoline. Since gasoline has a very inelastic demand (between 0.02 - 0.04). That is why the quantity demanded barely changes if the price of gasoline since a steep increase in gasoline prices represents a larger expense per month.
The price of gasoline during 2008 was so high that it reached $4.11 per gallon, while today it costs on average $2.10 per gallon. That is a huge difference specially if we consider inflation and current dollars. As gasoline prices increase with a steady demand, the revenues of oil companies skyrocketed.
