Final answer:
To increase total revenues from a software product with a price elasticity of demand of less than 1, the sales manager should increase the price of the software. (option A)
Step-by-step explanation:
If you are the sales manager for a software company and you know that the price elasticity of demand for your most popular software is less than 1, the best course of action to increase total revenues from that product is to increase the price of the software. Price elasticity of demand measures how sensitive the quantity demanded of a good is to a change in its price. When the elasticity of demand is less than 1 (inelastic demand), it means that the percentage change in quantity demanded is less than the percentage change in price. Therefore, an increase in price leads to a proportionally smaller decline in quantity demanded, which in turn increases total revenue.
Conversely, if the elasticity were greater than 1 (elastic demand), you would want to decrease the price to increase total revenue, as the quantity demanded would increase by a larger percentage than the price decrease. If elasticity is exactly 1 (unitary elasticity), you would maintain the current price as total revenue is maximized at that point.