1. Copyright Mark Van Couwenberghe, 201781
3) Exercises
1) The price of a train ticket is € 9,50. Monthly sales = tickets.
The price increases to € 10,07. New monthly sales = tickets.
Calculate price elasticity of demand and draw your conclusion on the elasticity.
What is price elasticity?
PRICE MECHANISM ON COMPETITIVE MARKETS

2. 82 2) A baker sells 500 breads a day. Unit price = € 2,20.
Copyright Mark Van Couwenberghe, 2017 82
2) A baker sells 500 breads a day. Unit price = € 2,20.
He wants to increase the price to € 2,31.
The baker expects his sales will decrease by 2%.
Calculate price elasticity of demand and draw your conclusion on the elasticity.
What is price elasticity?
PRICE MECHANISM ON COMPETITIVE MARKETS

3. 83 3) Imagine the demand for a product is: Q d = - 5 . P + 300
Copyright Mark Van Couwenberghe, 2017 83
3) Imagine the demand for a product is:
Q d = P + 300
The unit price decreases from € 10,00 to € 8,00.
Calculate price elasticity of demand and draw your conclusion on the elasticity.
What is price elasticity?
PRICE MECHANISM ON COMPETITIVE MARKETS

4. 84 4) The price elasticity of demand is – 1,2
Copyright Mark Van Couwenberghe, 2017 84
4) The price elasticity of demand is – 1,2
The shop owner decreases the unit price by 6%
The sales before the price decrease = units
Calculate the new sales (after the price decrease)
What is price elasticity?
PRICE MECHANISM ON COMPETITIVE MARKETS

5. 85 5) The price elasticity of demand is – 0,8
Copyright Mark Van Couwenberghe, 2017 85
5) The price elasticity of demand is – 0,8
The shop owner increases the price from € 80,00 to € 100,00
The sales before the price increase = units
Calculate the new turnover (after the price increase)
What is price elasticity?
PRICE MECHANISM ON COMPETITIVE MARKETS

6. 86 6) The price elasticity of demand is – 0,2
Copyright Mark Van Couwenberghe, 2017 86
6) The price elasticity of demand is – 0,2
The shop owner increases the price from € 20,00 to € 22,00
The sales before the price increase = units
Calculate the new sales (after the price increase)
What is price elasticity?
PRICE MECHANISM ON COMPETITIVE MARKETS