Final answer:
Total Revenue (TR) typically increases when both price and quantity demanded increase. However, under the specific scenario where a percentage rise in price is perfectly offset by an equal percentage drop in quantity, Total Revenue would remain unchanged, assuming perfectly elastic demand.
Step-by-step explanation:
When demand increases, we experience a rise in both the price level (P) and the quantity sold (Q). According to basic economic principles, Total Revenue (TR), which is calculated as Price (P) times Quantity (Q), would generally increase if both price and quantity increase. However, the question specifies a scenario where a given percentage rise in the price (P) is exactly offset by an equal percentage fall in the quantity (Q), which would result in Total Revenue remaining unchanged. This is a theoretical scenario that assumes a perfectly elastic demand, where price changes lead to proportional changes in the quantity demanded, resulting in no change in Total Revenue.
In reality, the effect on Total Revenue depends on the elasticity of demand. If the demand is elastic, a percentage rise in the price will lead to a larger percentage decrease in the quantity demanded, and Total Revenue will decrease. Conversely, if the demand is inelastic, Total Revenue will increase as the percentage rise in price outweighs the percentage decrease in quantity demanded.