If a price reduction leads to larger total revenue, demand is

If a price reduction leads to larger total revenue, demand for the product is said to be elastic. Price elasticity of demand is a measure that shows how much the quantity demanded of a good responds to a change in the price of that good. It is calculated as the percentage change in quantity demanded divided by the percentage change in price.

If the quantity demanded changes more than the price (in percentage terms), then the demand is considered to be elastic. This means that consumers are very responsive to price changes, and a decrease in price will result in a proportionally larger increase in quantity demanded, thus increasing total revenue.

Mathematically, when the price elasticity of demand is greater than 1 (elastic), a decrease in price increases total revenue. Conversely, when it is less than 1 (inelastic), a decrease in price decreases total revenue.