Final answer:
Customers facing a stock-out may purchase substitutes, wait, or buy from competitors, potentially shifting brand loyalty if stock-outs occur frequently.
Firms may respond to more expensive production inputs by seeking alternative technologies or innovating the production process.
Step-by-step explanation:
When customers are faced with a stock-out, they have several typical reactions. They may switch to buying a substitute product, delay their purchase until the item is back in stock, or decide to purchase from a competitor.
If the stock-out experience is frustrating or happens frequently, they may lose loyalty to the brand or store and permanently shift their preferences to competitors who can supply them consistently.
In the context of choosing production technology, when one input becomes relatively more expensive, firms will likely explore alternative production methods to reduce reliance on the costly input.
They might invest in technologies that allow other, less expensive inputs to be used more efficiently, or they may find ways to innovate the production process to maintain profitability. Substitution and innovation are common reactions to the rising costs of inputs in production.