Total Revenue: 

One important application of the concept of elasticity is its effect on total revenue. Total revenue from selling a product is equal to the price of the product times the quantity sold. Producers with an understanding of price elasticity of demand can therefore predict the effect that a price change will have on total revenue.

Suppose the firm considers increasing the price it's good. There are two effects:

A price effect- After a price increase, each unit of the good sold sells for a higher price, which tends to raise revenue.  

A quantity effect -After a price increase, fewer units of the good are sold, which tends to lower revenue.

The price elasticity of demand tells us what happens to total revenue when prices: its size determines which effect the price effect or the quantity effect is stronger. When demand is elastic, the quantity effect dominates the price effect; so a decrease in the price increases total revenue. When demand is inelastic, the price effect dominates the quantity effect; so a decrease in the price reduces total revenue. When demand is unit-elastic, the effects exactly balance; so a decrease in the price has no effect on total revenue. If demand for a good is elastic (the price elasticity of demand is greater than 1), an increase in price reduces total revenue. In this case, the price effect is weaker than the quantity effect. If demand for a good is inelastic (the price elasticity of demand is less than 1), an increase in price increases total revenue. In this case, the price effect is stronger than the quantity effect. If the demand for the good is unit-elastic (the price elasticity of demand is 1), an increase in price does not change total revenue. In this case the two effects off-set each other.