How to calculate elasticity:

Elasticity = (% change in volume)/(% change in price)

% change in volume = (Q2-Q1)/Q1

% Change in Price = (P2-P1)/P1

** If E>1, then demand is elastic, and consumers are price sensitive

**If 0<E<1, then demand is inelastic, and consumers are not price sensitive

Example 1: Kevin works at Pepsi on the Mountain Dew brand. His team decides
to lower their price by 3%. They see a subsequent increase in unit
sales of 8%. What is the elasticity, and is Mountain Dew sensitive to price changes?

8%/3% = 2.67 Elastic Demand, the customer is price sensitive

Example 2: John Lee is a brand manager for Kraft Macaroni and Cheese (MC). He
learned from Kroger Stores Central Indiana data that demand MC =
100,000 cases in December and 80,000 cases in January. Price/case =
$8 in December and $10 in January. Are buyers price-sensitive or
insensitive?

Change in demand = (80,000-100,000)/ 100,000 = -0.2

Change in price = (10-8)/8 = 0.25

Elasticity = -0.2 / 0.25 = 0.08 Inelastic demand, the customer is not price sensitive.

Example 3: For February, John Lee decided to drop the January price for MC from
$10/case to $8/case. He examined the data in early March and found
February demand = 120,000. January demand = 80,000/cases. Was
the response to the price cut elastic or inelastic?

Change in Demand = (120,000-80,000)/80,000 = 0.5

Change in Price = (8-10)/10 = -0.2

Elasticity = 0.5/-0.2 = -2.5 = |-2.5| = 2.5 Price is elastic

Price = Cost + Markup

MUP= Markup / Price

MUC= Markup /Cost

Example 1: Calculate the markup on price AND the markup on cost

price = 6000

markup = 2000

cost = 4000

MUP= 2000/6000 = 33%

MUC= 2000/4000 = 50%

Example 2: New Image is a small company that develops webpages for local
firms. The company wishes to have a 50% markup on the cost of its
services. The firm charges $2000 for a standard web development
effort. Find the cost, markup, markup on cost, and markup on price.

Price = 2000

Markup % = 50%

2000= x + mark up

a) Calculate the Cost

(P-C)/C = P/C -1 =0.5

1.5 = P/C

1.5 = 2000/C

C= 1,333.33

b) calculate the markup

Price = Cost + Markup

2000= 1333.33 + x

x= 666.67

c) calculate the markup on cost

MUC= Markup/Cost

X= 666.67/1333.33 = 0.50

d) Calculate the markup on price

MUP = Markup/Price

X= 666.67/2000 = 0.33

Calculating BEP

operating income = Volume * Margin per unit - Fixed costs

Also expressed as:
Volume= (operating income + fixed costs)/ margin per unit

BEP (volume)= fixed expenses/margin per unit

BEP (market share) = Break Even Volume = Market demand