Elasticity refers to the change in the amount of goods sold due to a change in price. A good with an elasticity of 1 means that any change in price will have an equal and opposite change in the amount of goods sold. So if you increased prices by 10%, you would expect to see a 10% decrease in the amount of goods purchased.
An INELASTIC good has an elasticity of less than 1. Meaning that a change in price will have less of an impact on the change in quantity of goods sold. For example, let's say you are on prescription medication that you need in order to survive. If the cost of that medication went up by 10%, 50%, or 500%, you'd likely still buy it (assuming you could afford it). So the change in price would not have much of an impact on the change in quantity sold (in this example it would have no impact and the good would be considered PERFECTLY INELASTIC).
An ELASTIC good has an elasticity greater than 1. Meaning a small change in price will have a larger change in quantity of goods sold. This is usually seen in goods that have substitutes. For example, let's say you went to the store to buy Coca Cola. You saw that they increased their prices by 5%. A lot of people would change their mind and buy Pepsi instead. So a 5% change in price might reduce quantity sold an amount much greater than 5%. That's because Coke and Pepsi are close substitutes, and the result would be elastic goods.
The reason that an increase in price results in an increase in total revenue for inelastic goods is the result of the following:
Total Revenue = Sales Price X Quantity of Goods Sold.
If you increase sales price by 10%, and decrease quantity of goods sold by less than 10% (because it is an inelastic good), you'll have a greater total revenue.
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