There is a certain elasticity in demand for public transport services in relation to the price true.
Generally demand is always there at the peaks and supply limited so the price is higher then whereas there is over supply in the off peaks hence the lower priced tickets to stimulate demand.
However it is not a simple relationship. A 20% increase in fares (say) would not result in zero public transport passengers becasue the alternatives are not nexcessarily there or attractive.
The MVV tarif is a fine negotiated balance. They have not lost passengers by increasing the prices, they have gained them by offering a better service.
The MVV is already cheaper than a car commute for many if not most people and it represents bloody good value for money imvho.
I don't like it, but it is a FACT (applies to Germany, UK, possibly other countries as well) that the fares payable on public transport have, are and will rise faster than the headline inflation rate and real incomes.
SPECIFICALLY in Munich, the MVG MUST cover its operating costs from the farebox take alone or it will be broken up and privatised. Think First, think Stagecoach, think Connex.

They would "offer" a crappier service, treat their staff worse and STILL charge higher fares!.