Unit elastic demand means the percentage change in quantity demanded exactly offsets the percentage change in price. With elasticities around -1, raising the price tends to cut the quantity sold by a similar percentage, so the product P × Q (total revenue) stays basically the same. Mathematically, if Ed = (%ΔQ)/(%ΔP) = -1, then %ΔQ = -%ΔP. Since total revenue is TR = P × Q, the approximate change in TR for a small price move is %ΔTR ≈ %ΔP + %ΔQ = %ΔP + (-%ΔP) = 0. So total revenue does not change for small price changes. That’s why the best answer is that total revenue does not change. Quantity demanded does change when price changes, but the revenue impact cancels out under unit elasticity.

This question tests the idea of substitutes in demand: two goods that can replace each other in consumption. When the price of one good rises, people switch to the other good, so demand for it increases. That positive response means the two goods are substitutes. For example, if coffee becomes more expensive, many buyers switch to tea, increasing tea’s demand. If the goods were complements, a higher price for one would reduce the demand for the other because they’re often used together, which would show a negative cross-price elasticity. The normal versus inferior distinction involves how demand changes with income, not with the price of a different good.

Elasticity of supply measures how responsive quantity supplied is to price changes. A perfectly elastic supply means producers are willing to supply any amount at the prevailing price, and even a tiny change in price would lead to a huge (theoretically infinite) change in quantity. Graphically, that corresponds to a horizontal supply curve, and the elasticity value is infinite. That’s why the appropriate label is perfectly elastic. The other terms describe different, finite responses: perfectly inelastic means no response (elasticity near 0), unit elastic means the percentage change in quantity equals the percentage change in price (elasticity = 1), and relatively elastic means a finite elasticity greater than 1.

Total revenue depends on how price and quantity move together when you slide along a linear demand curve, since TR = P × Q(P). For a linear downward-sloping demand, Q = a − bP, so TR = aP − bP^2, a concave parabola in price with a maximum at P = a/(2b). If you start at a price above that revenue-maximizing level and lower the price (from 8 to 6 in this case), you move toward the peak, and total revenue tends to rise because the increase in quantity sold more than offsets the lower price. For a concrete example, with Q = 20 − 2P, TR at P = 8 is 32, while at P = 6 it is 48, so revenue increases. However, if you started below the revenue-maximizing price, further price cuts could reduce TR. The scenario given aligns with TR increasing.