Elasticity of Demand and Total revenue

3 point a elastic demand 3 point a inelastic demand

2 2

1 point b 1 point b

0 10 20 30 40 50 0 10 20 30 40 50
Quantity Quantity
Graph A Graph B
Total revenue = point a (P X Q) = 3 x 10 = 30 Total revenue = point a (P X Q) = 3 x 10 = 30
Total revenue = point b (P X Q) = 1 x 50 = 50 Total revenue = point b (P X Q) = 1 x 20 = 20
A decrease in price will result to an increase A decrease in price will result to an decrease
in total revenue in total revenue

3 point a unitary demand

1 point b

0 10 20 30 40 50
Quantity 10
Graph C perfect inelastic PERFECT ELASTIC
Total revenue = point a (P X Q) = 3 x 10 = 30
Total revenue = point b (P X Q) = 1 x 30 = 30
In unitary demand decrease in price will result to same total revenue