Relationship Between Price Elasticity of Demand

Presentation Topic
& Total Revenue
 Basic Definition

Total Revenue is the total amount of sales of goods and services

Total Revenue : Price (P) * Quantity (Q)

Price elasticity of demand(PED) is the ratio of the percentage change in quantity

demanded of a product to the percentage change in price

 If PED = > 1, The product has Elastic Demand

If PED = < 1, The product has Inelastic Demand
If PED = 1, The product has Unitary Elastic Demand
 Relationship

• If the demand is elastic, a price change causes total revenue to

change in the opposite direction

• If the demand is inelastic, a price change causes total revenue to

change in the same direction

• if the demand is unit-elastic, a change in price will not change

the total revenue