ELASTICITY OF DEMAND AND MARKET STRUCTURE
SuperClassJanet Gordon and Phil Hopkins graduated several years ago with M.S. degrees in accounting and set up a full-service accounting firm. Janet and Phil have many small business clients and have noticed some pricing trends while compiling annual financial statements. The following data are for five of the pizza parlors which are Janet and Phil’s clients:
| Quantity Sold | Average Price |
Mamma Mia’s | 18,000 | $10.00 |
Happy Time Pizza | 21,000 | 7.90 |
Keg and Pie Pizza | 22,000 | 8.00 |
Fast Freddy’s Pizza | 30,000 | 7.00 |
Pizza-pizza | 24,000 | 7.50 |
Required:
1. Is the demand for pizza relatively more elastic or inelastic?
2. What type of market structure characterizes the pizza industry? How do you suppose that Mamma Mia’s can charge so much more per pizza than Fast Freddy’s does?
10 years ago
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