Question

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 of__________.

a. the target return effect.
b. the substitution effect.
c. dynamic pricing.
d. the income effect.
e. cross-price elasticity.

Answer 1

c. dynamic pricing.

Step-by-step explanation:

Dynamic pricing is when the price of a product is not fixed but flexible. Prices change based on changes in demand. It is also known as surge pricing or demand pricing.

The Coffee Express company reduces its prices on the weekends due to a fall in demand. This is Dynamic pricing.

Cross price elasticity measures the degree of responsiveness of quantity demanded of a good to changes in the price of another good.

The income effect measures how consumption and demand for a product changes when real income changes.

The substitution effect measures how a consumer subsistuites one good for another good when there's a change in price.