If the price elasticity of demand for a product is inelastic, what effect will a price increase have on total revenue?

When the price elasticity of demand is inelastic, it means that consumers’ demand for the product is relatively unresponsive to price changes. In other words, a percentage change in price will result in a smaller percentage change in the quantity demanded.

When the price of an inelastic good increases, consumers continue to buy relatively similar quantities, since the product is considered necessary or lacks close substitutes. As a result, the total revenue, which is calculated as price multiplied by quantity sold, will increase. This is because while the price rises, the decrease in quantity sold is proportionately smaller, leading to a net gain in total revenue.

For example, if the price of a product rises by 10% and demand decreases by only 3%, the higher price compensates for the slight loss in quantity sold, ultimately resulting in increased total revenue. Thus, an increase in price for an inelastic good will lead to increased total revenue.