Go into the preferred name, and click Save. This will relabel the folder as it appears in the Folders panel and as it does on your drive. You can right-click the folder again and choose Show in Finder (PC: Show in Explorer) to open your file browser to that folder to confirm.
Relabeling folders is one of those tiresome tasks that is typically a source of self-inflicted injury to numerous Lightroom Classic (LrC) users. The process is basic in LrC, and yes, there is a way to do it beyond LrC (but it is a lot more tedious).
The essential to understanding why you wish to do this in LrC is that the course to where each image is saved on your computer is what LrC uses to discover and access your images. On a Mac, that path starts with the volume name and on Windows the path starts with the drive letter, but in both cases the course goes on to include every folder and subfolder down to the actual filename of each photo.
As long as you utilize LrC to relabel the folder then it will upgrade the actual name of the folder along with the path stored in the brochure, and all will be well. Heres how to do it:
Expand the Folders panel and find the folder you want to rename.
Thats all there is to it. If you relabel folders beyond LrC, then you will need to follow the steps for when folders and images are considered missing out on to update the catalog to the folders new name.
Then, right-click the folder and select Rename … to open the Rename Folder dialog box.