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To the right is a graph illustrating the relationship between
elasticity and revenue on a linear demand curve.
Note, where demand is elastic, total revenue (TR) is increasing as price falls. However, on the inelastic portion, TR is falling as price is falling. Revenue is maximized where elasticity is exactly 1.
One implication of this is that any monopolist that finds itself on the inelastic portion of its
demand curve should increase price.
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