The Coffee Express company is located in a business district with few customers on the weekend. To attract customers on Saturday and Sundays, it reduces its prices on these two days. This is an example ofA. the target return effect.

B. the substitution effect.

C. dynamic pricing.

D. the income effect.

E. cross-price elasticity.

Question

Business

Michael Drake

21 September, 02:22

The Coffee Express company is located in a business district with few customers on the weekend. To attract customers on Saturday and Sundays, it reduces its prices on these two days. This is an example ofA. the target return effect.

B. the substitution effect.

C. dynamic pricing.

D. the income effect.

E. cross-price elasticity.

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Answers (1)

Know the Answer?

Jude Kidd · Answer 1

C. dynamic pricing.

Explanation:

This is an example of dynamic pricing, also known as price discrimination. This involves charging different prices to different consumers, very common in aviation where people pay different prices for the same class of a flight. Dynamic pricing also works well in situations like the one described in this question. On weekdays, there is a high movement of customers, so the price can be high. On the weekend there is no commercial movement, so the coffee shop decreases the price to generate a stimulus for customers to leave their homes to go to the store to consume the product. Therefore, the price of coffee in this case is dynamic and varies according to available demand.