decrease or vice versa . Price elasticity of demand tells us how much quantity demanded will
decrease when price increases or how much quantity demanded will increase if price decreases .
On the other hand , according to the law of supply , if the price increases , quantity supplied of a good
or service will increase . Similarly , if price decreases , quantity supplied will decrease . The degree of
sensitivity ( responsiveness ) of production / supply to a change in price is measured by the concept of
price elasticity of supply .
Total revenue is calculated as the quantity of a good or service sold multiplied by its market price .
Thus , it is a measure of how much money a company makes from selling its product . The core
objective of a firm is maximizing profit . One of the ways to maximize profit is increasing total revenue .
The firm can increase its total revenue by selling more items or by raising the price . Among others ,
this depends on the nature of the price elasticity of demand . Moreover , the length of time is an
important factor in determining price elasticity of demand and supply .