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Sagot :
Because price and total revenue always move simultaneously, the total revenue test for elasticity does not apply to supply.
A total revenue test: what is it?
A total revenue test calculates the change in total revenue due to a change in a product or service's price in order to estimate the price elasticity of demand.
What connection does elasticity have with total revenue?
When demand is elastic (price elasticity > 1), there is a negative relationship between price and total revenue, which means that price increases will result in drops in total revenue. When demand is unit elastic (price elasticity = 1), price changes have no impact on overall revenue.
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