When chef Paolo prices his speciality pizza at 10, he sells 18 pizzas a day. When he reduces his price to 9, he sells 20 a day and when he reduces the price further to 8 he sells 22 a day.

A. Calculate the price elasticity of demand at prices 10 and 9.

B. Even without knowing anything about his cost curves, we can be sure that he will never sell at the price 8. How?

C. If his marginal cost is constant at 5, what can we say about the price he will charge? D. What conclusions can we draw about the relationship between price elasticity of demand and a firm's pricing strategy?