An increase in total revenue results from which of the following? a. Price increases when demand is unitary elastic. b. Price increases when demand is elastic. c. Price decreases when demand is elastic. d. Price decreases when demand is inelastic.

To determine which scenario leads to an **increase in total revenue**, let's analyze each option based on the **price elasticity of demand**: 1. **Total Revenue (TR)** is calculated as: \[ \text{TR} = \text{Price} \times \text{Quantity} \] 2. **Price Elasticity of Demand** measures how much the quantity demanded responds to a change in price: - **Elastic Demand (\( \text{Elasticity} > 1 \))**: Quantity demanded is highly responsive to price changes. - **Inelastic Demand (\( \text{Elasticity} < 1 \))**: Quantity demanded is less responsive to price changes. - **Unitary Elastic Demand (\( \text{Elasticity} = 1 \))**: Quantity demanded changes proportionately with price changes. **Analysis of Each Option:** - **a. Price increases when demand is unitary elastic.** - **Effect on TR**: No change. When demand is unitary elastic, any price increase or decrease doesn't affect total revenue. - **b. Price increases when demand is elastic.** - **Effect on TR**: Decreases. With elastic demand, a price increase leads to a more than proportionate decrease in quantity demanded, reducing total revenue. - **c. Price decreases when demand is elastic.** - **Effect on TR**: Increases. When demand is elastic, a price decrease leads to a more than proportionate increase in quantity demanded, thereby increasing total revenue. - **d. Price decreases when demand is inelastic.** - **Effect on TR**: Decreases. With inelastic demand, a price decrease leads to a less than proportionate increase in quantity demanded, reducing total revenue. **Conclusion:** Only **Option c** results in an **increase in total revenue** because lowering the price when demand is elastic induces a sufficiently large increase in quantity demanded. **Answer:** c. Price decreases when demand is elastic.