Raising prices lowers total revenue for a product with inelastic demand and raises total revenue for a product with elastic demand.

Question

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Raising prices for a product with inelastic demand typically increases total revenue because consumers are relatively insensitive to price changes and will continue to buy the product. For a product with elastic demand, raising prices can lower total revenue because consumers are more sensitive to price changes and will reduce their purchases or switch to alternatives.

Raising Prices Lowers Total Revenue for a Product with Inelastic