Question

Your company wants to offer a 10% discount to volume customers. The simplest way to do this is

a. create a Price Level with a Fixed Percentage that decreases by 10% and set the customer Price Level default to this rate.
b. in the Company Customer Preferences, set the Major Customer Discount to 10%.
c. create a New Term called 10% Net 30 with a Discount Percentage of 10%.
d. set the Price Level to a Per Item value for all items to a rate reduced by 10% using QuickMath.

Answer 1

The simplest method for a company to offer a volume discount is to create a Price Level with a 10% decrease, and this method automatically adjusts the rates for volume customers. In market strategies, predicting a monopolist's potential reaction to new competition is crucial, and the effect of a price decrease on quantity demanded is not always constant.

Step-by-step explanation:

The question pertains to implementing a discount strategy for volume customers in a company. The most straightforward option to offer a 10% discount to volume customers would be Option A: creating a Price Level with a Fixed Percentage that decreases by 10% and setting the customer Price Level default to this rate. This method is simple and applies the discount automatically to all eligible purchases made by the volume customer.

Regarding market strategies, if you are planning to enter a market dominated by a monopolist and are considering setting your prices 10% lower than the monopolist, it's essential to forecast possible competitive reactions such as price cuts, improvements in their product or service, or even initiating a price war. Additionally, in terms of price elasticity, if a 10% decrease in the price of a product results in an 8% increase in quantity demanded, another 10% decrease in price may not necessarily lead to the same percentage change in demand, as the relationship between price changes and demand can vary at different price levels.