Adventures in Downward Sloping Demand Curves and Elasticity

One of the supermarkets near my house has begun charging customers five cents for each plastic bag they take from the store, to encourage customers to reuse bags. According to a sign at the store, the charge is working:

In a typical week, this store gave away 98,000 plastic bags - most of which ended up in landfills. Now we are using 1/3 as many.

Time will tell if this will last - but that is a rather remarkable drop considering it is only a 5 cent charge in a relatively affluent neighborhood. The behavioral economists are right - the price 'free' leads to a massive increase in quantity demanded.

I suspect the demand curve for plastic bags at supermarkets has a discontinuity between the price of zero and any strictly positive amount. After that I would anticipate the price elasticity of demand for the bags is highly inelastic. I suspect a price of one cent per bag or 25 cents a bag would lead to about the same sales level as the five cent price.

It would be a fun experiment to run. Now only if I can convince the manager of the local supermarket.