Total Revenue Test

The Total Revenue Test is a method used to understand how price changes affect a company's sales revenue. When a business raises its prices and total revenue increases, demand is considered inelastic, meaning customers are less sensitive to price changes. Conversely, if raising prices leads to a decrease in total revenue, demand is elastic, indicating customers are more price-sensitive. This test helps businesses strategize pricing by revealing how price adjustments might impact their overall sales and profitability.