We know that if demand is elastic, any percentage change in price leads to a larger percentage change in quantity demanded. In the same way, if demand is inelastic, any percentage change in price leads to a smaller percentage change in quantity demanded.

   A natural question to ask then is what happens to revenue (or total expenditure) when price changes? When price rises, do firms selling the product find that their revenue has risen because of the higher prices, or fallen because of the reduced sales? (By the way, revenue or total expenditure is just P x Q - Price times Quantity bought or sold).

   Likewise, when price falls, does revenue fall because of the lower prices, or does it rise because of the increased sales? Like most questions in economics, the answer is a resounding, it all depends. In this particular case, it all depends on the own price elasticity of demand.

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