If a company raises its prices and total revenue decreases, what can we infer about the demand for its product?

If a company raises its prices and total revenue decreases, we can infer that the demand for its product is elastic. This means that consumers are sensitive to price changes; when the price goes up, they buy significantly less of the product. For example, if a coffee shop raises the price of a cup of coffee from $3 to $4 and sees a drop in total sales from 100 cups to 50 cups, the total revenue falls, indicating that customers are not willing to pay the higher price. In this case, the decrease in quantity sold is greater than the increase in price, leading to lower overall revenue. Therefore, the company may need to reconsider its pricing strategy to attract more customers.