“Short-term price increases tend to depress industry profits in the long run by accelerating the introduction of new capacity and depressing market demand.” Discuss.
What will be an ideal response?
This is a difficult question since the answer depends on the assumptions made about the characteristics of industry, competitive behavior, demand perspectives, and the environment. Generally speaking, however, short-term price increases (giving an impression of high profits) may make the industry attractive for competitors to enter. In this way, while demand will be declining (due to higher prices), industry capacity will be increasing. Ultimately, then, price will come down. Thus, a company should be careful about increasing prices in the short run. (The above analysis may not hold in those cases where entry in the industry is difficult.)
You might also like to view...
A deposition is oral testimony given by a party or witness during the trial.
Answer the following statement true (T) or false (F)
Which of the following measures the ratio of items purchased to product views?
A. conversion rate B. cart conversion rate C. browse-to-buy ratio D. view-to-cart ratio
Which of the following is an economic factor that a company should consider before deciding to enter into a new country?
A) population size and growth B) natural resources C) cultural and social norms D) political stability E) climate
The if-converted method of computing EPS data assumes conversion of convertible securities at the
a. beginning of the earliest period reported (or at time of issuance, if later). b. beginning of the earliest period reported (regardless of time of issuance). c. middle of the earliest period reported (regardless of time of issuance). d. ending of the earliest period reported (regardless of time of issuance).