at that price level, then the band should cut the price, because the percentage drop in price will result in an

even larger percentage increase in the quantity sold—thus raising total revenue. However, if demand is

inelastic at that original quantity level, then the band should raise the ticket price, because a certain

percentage increase in price will result in a smaller percentage decrease in the quantity sold—and total

revenue will rise. If demand has a unitary elasticity at that quantity, then an equal percentage change in

quantity will offset a moderate percentage change in the price—so the band will earn the same revenue

whether it (moderately) increases or decreases the ticket price.

If

Demand

Is . . .

Elastic

Unitary

Inelastic

Then . . .

Therefore . . .

A given % rise in P will be more than offset by a larger % fall in Q

so that total revenue (P × Q) falls.

A given % rise in P will be exactly offset by an equal % fall in Q
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