Determinates of Price Elasticity K-Mart-- Determinants of demand elasticities 1.
ID: 2506481 • Letter: D
Question
Determinates of Price Elasticity
K-Mart-- Determinants of demand elasticities
1. Generally, the elasticity of demand for a product will be greater when there are:
(a) the larger number of substitutes,
(b) the greater proportion of income an item takes,
(c) the less the item is considered to be a necessity, and
(d) the longer length of time allowed for adjustment to change the price of the good.
2. K-Mart, at its web-site, K-Mart.com posts a weekly sales circular on selected merchandise, organized by department. It must be concluded that the demand for these products are elastic. The decrease in price will increase total revenue. Check out this week's specials and, select ten items.
If the product meets all the determinates of elasticity the more elastic the product. Such as a diamond necklace. So the necklace may go on sale or the store may offer unlimited cleaning of the diamonds or storage to encourage people to buy the necklace.
Whereas a product that meets a few of the determinates of elasticity are considered necessities.
For Example: Do not use any of my products.
Yes/1pt.
Yes/1pt.
0
0
0
0
0
0
0
0
Yes/1pt.
Yes/1pt.
1
1
1
1
Determinates Dial Body Soap Tide Laundry Det. Cigarettes Generic Heart Medication Does the product have a large number of substitutes?Yes/1pt.
Yes/1pt.
0
0
Does the product require a large proportion of your income?
0
0
0
0
Is the product a necessity?
0
0
Yes/1pt.
Yes/1pt.
Do you take a long time to think about buying the product? 0 0 0 0 Total for Each Product
1
1
1
1
Explanation / Answer
1. a
2.
Women's Clothes: 2 (sub+necessity)
Fragrence: 1 (sub)
Chips: 1 (sub)
Fisher Price toys: 1 (sub)
Crockpot: 2 (sub+think about it)
Diamond bracelet: 2 (think about it, income)
Luggage: 1 (think about it)
Yoga mat: 0
Vacuum: 1 (think about it)
Space Heater: 1 (necessity)
Which specials score 4 points (or 4 yes) for meeting the criterion of each determinant above?
None scored a 4, however women's clothing could potentially score a 4 as there are many substitutes, it is a necessity, it can take a large portion of income, and depending on what it is, a consumer may thing about it before she buys it.
Which specials score 0 (or no yes)?
The Yoga mat.
Why would K-Mart include any item that scored less than a 3 (or less than 3 yes) ?
Because stores like K Mart have a mark up any where from 25%-50% on their goods, so having any type of sale, even 30% off for womens clothing still gives them revenue and gets people in the store to buy goods that are not on sale.
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