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A Local Pizzeria Charges $10 for a Pizza

question 521

Essay

A local pizzeria charges $10 for a pizza. The owner of the pizzeria wants to increase the company's total revenue. A recent market research shows that the price elasticity of demand for his pizza is about 1.5. Should the pizzeria lower or raise the price? Explain your answer.


Definitions:

Closing Entries

Transactions noted at the end of an accounting cycle for the purpose of transferring balances from temporary accounts to their permanent counterparts.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, thereby resetting the temporary accounts for the next period.

Post-Closing Trial Balance

A listing of all balance sheet accounts with balances after closing entries are made, used to verify the equality of debits and credits.

Current Ratio

A financial metric comparing a company's current assets to its current liabilities to assess liquidity.

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