When demand is elastic, what is the relationship between price and total revenue if the price is lowered?

When demand is elastic, consumers are very responsive to price changes. Specifically, if the price of a good is lowered, the quantity demanded will increase significantly. This happens because the percentage change in quantity demanded is greater than the percentage change in price.

Therefore, when the price is lowered, the increase in quantity demanded will offset the loss in revenue per unit sold due to the price reduction. As a result, the overall total revenue—calculated as price times quantity—will increase.

In contrast, inelastic demand would imply that consumers do not significantly increase their quantity demanded in response to a price decrease, leading to a potential decrease in total revenue. The other options focus on scenarios that do not apply when demand is elastic; total revenue does not remain constant or become unpredictable under these conditions. Thus, the correct relationship is that total revenue will increase when the price is lowered in the case of elastic demand.