Price Elasticity of Demand of Dominos Pizza
Domino’s is a Global Brand, established in 1960 and is the perceived world pioneer in pizza delivery operating a network of organization company-owned and franchise-owned stores in the United States and International markets.
In 1996, the first Domino’s Pizza store was opened in New Delhi. Over the period, Domino’s Pizza India has stayed concentrated on conveying extraordinary tasty Pizzas and sides, predominant quality, uncommon visitor think about cash contributions.
Why is price important?
Price is the only one of the “4 P’s” of marketing (including promotion, place and product) that provides a genuine mechanism for obtaining value back from customers. It’s easy to change product prices but it can be hard to get the price right.
Supply and Demand
Free market economy suggests that when the price of a pizza rises, consumer demand will go down. This equation gives a downward sloping demand curve and when we add a supply curve where a firm’s willingness to supply pizzas increases when price increases, the intersection point is the free market price.
The definition of Price Elasticity of Demand (PED) is the responsiveness and elasticity, of the quantity demanded of a good or service to a change in its price. More precisely, it gives the percentage change in quantity demanded in response to a one percent change in price. The PED is a unit- free measure.
Elastic demand is defined as a large percentage change in quantity demanded for given percentage change in price. Inelastic demand is defined as a small percentage change in quantity demanded for given percentage change in price. Unit elastic demand is defined as given in percentage change in price, there will be an equal percentage change in quantity demanded.
The Demand for Pizza depends upon the following variables:
- Price of the Pizza;
- Availability of Substitute (burger, fast foods);
- More complementary goods (Ketchup, Toppings);
- Occasion and Interest;
- Number of Competitors in the market
The price elasticity of demand for Domino’s pizza is elastic because recent sales have increased by 50% while prices have only decreased by 28%. The PED of the pizza means that a small change in price can lead to lead to a large increase in the demand for the pizza. By knowing this the company could increase revenue by decreasing price slightly without risking a large decrease in sales. To make the pizza more inelastic, Dominos could market the pizza as more of a healthy and necessary fast food, with the introduction of new products. They could also introduce unique types of pizzas that are not sold by others so that they could make the products more inelastic.
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