Final answer:
Elastic demand in the market implies that a small change in price will result in a larger change in quantity demanded. Higher prices decrease total revenue, while lower prices increase it. For example, luxury products are more likely to experience elastic demand compared to essential goods.
Step-by-step explanation:
Elastic demand in the market implies that a small change in price will result in a larger change in quantity demanded. This means that consumers are very responsive to changes in price. When demand is elastic, an increase in price will result in a decrease in total revenue for the sellers, while a decrease in price will result in an increase in total revenue. This is because a higher price will deter buyers from purchasing the product, while a lower price will encourage more buyers.
For example, if the price of a luxury product, such as high-end designer clothing, is increased, consumers may choose to buy cheaper alternatives or hold off on purchasing altogether. On the other hand, if the price is reduced, more consumers may be willing to buy the product, resulting in higher total revenue.
In contrast, when demand is inelastic, a change in price will have a smaller impact on quantity demanded. This means that consumers are less responsive to changes in price. In this case, if the price is increased, the total revenue for the sellers may increase, as consumer demand remains relatively stable even with a higher price.