Question
You own a property on Main Street on which a small, vacant take-out pizza stand sits. There are other vacant take-out pizza stands in the
You own a property on Main Street on which a small, vacant take-out pizza stand sits. There are other vacant take-out pizza stands in the same locale (i.e. Main Street) as well as on the less busy Side Street locale. From your market analysis, you are confident that the sites will attract the following number of pizza sales each month (based on their locale):
Main Street:450
Side Street:300
The market price for pizzas in the city is $7.00.You know the cost of running and maintaining a pizza stand (paid by the operator of the business of course) is fixed at $900 per month.
Seeing how much profit there is to be made in the pizza business (compared to the alternative industry which, as a reminder, pays just $200 per month), would-be pizza stand operators rush to open up new businesses.
With far more be operators in the market than properties available for them, what will the rent for each property in each of the locales (Main Street and Side Street)eventually stabilize at? Why? Show your work with the help of a table.
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