The sales manager of a retail outlet suggests that the best way to increase customers is to have a sale. If a 10 percent price cut doesn’t bring in enough customers, then he’ll cut prices 20 percent. Increased cash flow should take care of profits. Do you agree? Explain.
What will be an ideal response?
A price cut will (usually) lead to increased unit sales. However, if demand is inelastic, then the price cut will reduce total revenue. The pricing plan makes more sense if demand is elastic.
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As more politically directed spending leads to more rent-seeking activity,
a. the spending will increase GDP, but only if it is directed toward productive activity. b. the spending will decrease GDP, but only if it is directed toward unproductive activity. c. resources will be channeled toward unproductive activity and away from productive activity. d. resources will be channeled toward productive activity and away from unproductive activity.
If a hurricane were to wipe out the majority of the eastern seaboard in the United States:
A. neither the short-run nor long-run aggregate supply curves would be affected. B. only the long-run aggregate supply curve would shift left. C. only the short-run aggregate supply curve would shift left. D. the long-run and short-run aggregate supply curves would both shift left.