Referring to intended and unintended consequences, assess the likely effectiveness ofSupermarket Chain 1’s decision to hold prices at P1 and set buyer limits.
Question
Referring to intended and unintended consequences, assess the likely effectiveness ofSupermarket Chain 1’s decision to hold prices at P1 and set buyer limits.
Solution
To assess the likely effectiveness of Supermarket Chain 1's decision to hold prices at P1 and set buyer limits, we need to consider both the intended and unintended consequences of this decision.
Intended Consequences:
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Preventing Price Inflation: By holding prices at P1, the supermarket aims to prevent price inflation, which can be beneficial for consumers, especially in times of economic uncertainty or product scarcity.
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Ensuring Fair Distribution: Setting buyer limits can help ensure that more customers have access to the products they need, rather than allowing a few customers to buy in bulk and potentially cause shortages.
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Maintaining Customer Loyalty: By taking these steps, the supermarket may also aim to maintain customer loyalty. Customers may appreciate the fairness of this approach and choose to continue shopping at this supermarket in the future.
Unintended Consequences:
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Potential for Black Market: If the demand for the products is very high, holding prices at P1 and setting buyer limits could potentially lead to the creation of a black market, where people buy products at P1 and sell them at higher prices.
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Reduced Profit Margins: If the supermarket's costs increase (for example, if their suppliers increase prices), holding prices at P1 could reduce their profit margins. This could potentially impact the supermarket's financial stability.
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Customer Dissatisfaction: Some customers may be dissatisfied with the buyer limits, especially if they are used to buying in bulk. This could potentially lead to a loss of customers.
In conclusion, the effectiveness of this decision will depend on a variety of factors, including the level of demand for the products, the supermarket's cost structure, and the reactions of customers and potential competitors. It's a delicate balance to strike, and the supermarket will need to monitor the situation closely and be ready to adjust their strategy if necessary.
Similar Questions
Source DThe other supermarket chain in Country A, Supermarket Chain 2, must now decide if it will followthe decision of Supermarket Chain 1 to hold the price of frozen fries at P1 and set buyer limits.The following payoff matrix shows the revenue ($billion) that each supermarket chain can makewhen it chooses between:• holding price and setting buyer limits• not holding price and not setting buyer limitsSupermarket Chain 1Hold price andset buyer limitsNot hold price andnot set buyer limitsSupermarketChain 2Hold price andset buyer limits1.92.01.72.3Not hold price andnot set buyer limits2.12.21.82.4(g) (i) Use game theory to explain the likely action of Supermarket Chain 2._____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ (2 marks)(ii) Explain why Supermarket Chain 2 must consider the actions of Supermarket Chain 1when deciding whether to hold prices and set buyer limits._____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ (2 marks)
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page 6 of 10Source CConsumers who purchase frozen fries from supermarkets have also been affected by the changesin the market for frozen fries. Supermarket Chain 1, one of Country A’s two supermarket chains,has chosen to hold the price of frozen fries at P1 and has also set buyer limits to help availabilityand affordability for customers.(f ) (i) Use the following diagram to identify the impact on both consumer surplus and producersurplus of Supermarket Chain 1’s decision to hold prices at P1. Write your answer in thetable below.Market for frozen fries at supermarket chainsPP2PeP1 P1Sab cd e f gh i j k l DQQ 2Q eQ 1Consumer surplus if price is Pe Consumer surplus if price is P1Producer surplus if price is Pe Producer surplus if price is P1
Marketers that set unrealistically high consumer expectations of a product through advertising, personal selling, or other types of promotion may generate higher initial sales, but it will eventually result in ________ if the product fails to achieve these expectations.Multiple Choicehigh conversion ratessocial riskpostpurchase dissatisfactionunfulfilling decision heuristics
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