The reason for dumping is that the demand curve for ABC Co.’s computers is ______ because ______ are available from other nations.
|a. more elastic in Japan; more substitutes are available from other nations|
b. more elastic in Japan; fewer substitutes are available from other nations
c. more inelastic in Japan; more substitutes are available from other nations
d. more inelastic in Japan; fewer substitutes are available from other nations
The Correct Answer Is:
- a. more elastic in Japan; more substitutes are available from other nations
The reason for dumping is that the demand curve for ABC Co.’s computers is more elastic in Japan because more substitutes are available from other nations are available from other nations.
The result is that Japanese consumers have more options when it comes to purchasing computers and are more likely to switch brands if ABC Co.’s computers become too expensive. By not lowering their prices, ABC Co. may have difficulty making a profit in Japan if their sales decrease. A common solution to this problem is for ABC Co. to dump its excess inventory in Japan, where the computers are sold at a much lower price than in other markets. Their market share in Japan could increase as a result of clearing their excess inventory.
When there is a surplus of one product in one market and a lower demand for it, companies use dumping as a business strategy. In addition to consumer preferences, increased competition, and changes in production costs can cause this surplus. Due to Japan’s more elastic demand curve for ABC Co.’s computers, dumping is the cause.
Demand elasticity refers to consumers’ responsiveness to price changes. Consumers are more likely to switch to alternative products if a particular product’s price increases in a market with high elasticity. In such markets, companies will be under more pressure to lower their prices to remain competitive. There are more substitutes from other nations available to ABC Co. in Japan, which makes their demand more elastic.
It is easier for Japanese consumers to switch to a different brand if ABC Co.’s computers become too expensive since they have a wide range of options for purchasing computers. In this case, ABC Co. may find that their sales in Japan decrease if their prices are not lowered. The company may dump excess inventory in Japan to avoid this problem, so the computers are sold at a lower price there than elsewhere. As a result of this strategy, ABC Co. may be able to get rid of excess inventory in Japan and increase their market share.
Neither the company nor the market may benefit from dumping. ABC Company’s profit margins can be affected and its reputation can be hurt. Consumers can benefit from decreased prices and a rise in competition as well as a decrease in local production and jobs.
Due to the more elastic demand curve for computers in Japan, ABC Co. decided to dump their excess inventory there. In addition to helping a company clear excess inventory and increase their market share, this strategy can have negative consequences for a company and the market as a whole. When making business decisions, companies should weigh the benefits against the risks of their strategies.