If a company increases the price of its product and observes an increase in total revenue, what can be inferred about the price elasticity of demand for that product?

When a company raises the price of its product and sees an increase in total revenue, it suggests that the demand for that product is inelastic. This means that consumers are not very sensitive to price changes; they will still buy the product even if it costs more. For example, if a company sells a popular medicine and raises its price, people will still purchase it because they need it, leading to higher total revenue. Inelastic demand indicates that the percentage drop in quantity demanded is smaller than the percentage increase in price. Therefore, the company benefits financially from the price increase because sales do not drop significantly.