- This topic has 4 replies, 2 voices, and was last updated 1 year ago by
.
- Posts
Jo Co budgeted that it would sell 20,000 units of its main product, based on an expected total market of 250,000 units, but it has the capacity to increase production if necessary. Demand for the product is price-elastic. However, after Jo Co produced its budget, one of its competitors became insolvent.
Which of the following is this most likely to give rise to?
A favourable sales price variance
A favourable market share variance
A favourable market size variance
An adverse market size variance
sir, answer was the 2nd one ..can you plz explain sir,why cant it be market size?
Jo Co budgeted that it would sell 20,000 units of its main product, based on an expected total market of 250,000 units, but it has the capacity to increase production if necessary.
Demand for the product is price-elastic. However, after Jo Co produced its budget, one of its competitors became insolvent.The 20,000 of 250,000 is the share that we are expecting, but if one of the competitors becomes insolvent you then find what you are revising your share to be will be a higher proportion. Because your share will be greater.
If a price change for a product causes a substantial change in either its supply or its demand, it is considered elastic. So it means that there are acceptable substitutes for the product.
Examples would be cookies, luxury automobiles, and coffee.
It’s telling you that a competitor is no longer offering a substitute product. So that opens up the market for more share.
- You must be logged in to reply to this topic.