In December, after a heavy winter storm, a quote was received from General Elect
ID: 1101305 • Letter: I
Question
In December, after a heavy winter storm, a quote was received from General Electric for 33 individual air conditioning units at $410 each. Past buy history indicates that 6 months ago, following a record drought, the price for the same unit was $450 each when 31 units were bought. Which factor had the greatest impact on price?
d. Change in the competitive environment
a. Change in market conditions b. Change in technology c. Change in the purchasing power of the dollard. Change in the competitive environment
Explanation / Answer
Answer : a. Change in market conditions.
Explanation : Clearly, it is mentioned in the question that 6 months ago, there was a severe drought and hence naturally there would be a higher demand for the air conditioning units. We know that from the basic concepts of econmics the greater the demand, the higher the price of a commodity/service.Hence it was priced at 450 $ for 31 units.
The same air conditioning units 6 months later would be less in demand owing to the heavy winter storm.Thus, we see the price of the air conditioning units going down so that the company could attract the customers and boost its sales.