Elasticity and Revenue    What if demand is elastic? Is there a surefire way for firms to increase profits? The answer is no. Remember the graph to the right. If demand is elastic, revenue increases when price falls, increasing quantity sold and therefore increasing production cost. With both revenue and cost rising, we can't say if profit is increasing or decreasing. We would need to know which is rising faster, and elasticity doesn't give us sufficient information to determine this.

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