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Elasticity - Coggle Diagram

- - - - consumers are highly responsive to changes in price
      - when the price of a product or service increases, consumers will reduce their consumption by a proportionally greater amount
        
        leading to a decrease in total revenue
      - if the price decreases, consumers will increase their consumption by a proportionally larger amount
        
        resulting in an increase in total revenue
    - - consumers are less responsive to changes in price
      - if the price of a product or service goes up, the quantity demanded will decrease, but not by much
        
        total revenue will increase
      - if the price goes down, the quantity demanded will increase, but only slightly
        
        leading to a decrease in total revenue.
    - - percentage change in quantity demanded is exactly equal to the percentage change in price
      - any change in price will not affect total revenue
      - the proportional increase in quantity demanded will offset the decrease in price and vice versa
      - Can be said that total revenue is maximised when demand is unitary elastic.
    - - Total Revenue is maximised when elasticity is = 1, Unitary Elastic
      - In the elastic range, total revenue can be increased by decreasing price.
      - In the inelastic range, total revenue can be increased by increasing price.
      - Revenue Test
        
        When demand is elastic:
        
        A price increase (decrease) leads to a decrease (increase) in total revenue.
        
        When demand is inelastic:
        
        A price increase (decrease) leads to an increase (decrease) in total revenue.
        
        When demand is unitary elastic:
        
        Total revenue is maximised.