Price Elasticity Problems

Last year Lina Electronics used to sell 300 TV sets daily at a price of SR 100 per unit, this year Lina sales is just 200 TV daily, as a result of the discount announced by its competitor. I the price elasticity of demand for Lina TVs is -5, find the price level that could raise sales to its original level.

 

Now the firm sells 200 units (Q₁), at price of SR 100 (P₁)

Want to sell 300 units (Q₂), at price of SR (P₂)

-5 = 300 – 200 * P₂ + 100  =  92.3

        P₂ – 100   * 300+200

Lina Electronics made a 10% discount on its TVs, their competitor made the same discount on their TVs. If the own price elasticity of demand for Lina TVs is -5, and the cross price elasticity between the quantity demanded of Lina TVs and the price of its competitor is 2, find how these discounts would affect the quantity demanded of Lina sets.

The percentage in Q = -5 (-10) + 2 (-10) = 50 – 20 = 30, i. e. the quantity demanded will increase by 30%.