A company lowers the price of a product and notices that total revenue increases. What does this indicate about the product's price elasticity of demand?

When a company lowers the price of a product and sees an increase in total revenue, it suggests that the product has elastic demand. This means that customers are very responsive to changes in price; when the price goes down, they buy a lot more of that product. For example, if a company sells a popular snack for $2 and then lowers the price to $1, many more people might buy the snack, leading to higher total sales and revenue. In this case, the percentage increase in quantity sold is greater than the percentage decrease in price. Therefore, the product's demand is elastic, showing that lower prices can lead to increased sales and revenue.