Question

sometimes a rise of only 10 percent in consumer demand can cause as much as a 200 percent rise in business demand for products for the next period. this is an example of ________

Answer 1

The phenomenon where a minor increase in consumer demand leads to a much larger increase in business demand is known as the bullwhip effect, often causing inefficiencies in the supply chain.

Step-by-step explanation:

The phenomenon described where a small increase in consumer demand causes a significantly larger increase in business demand for products is known as the bullwhip effect. This is an instance of demand amplification where the demand signals get magnified as they move up the supply chain, often resulting in excess inventory and inefficiency. In the case of the auto industry, a slight rise in consumer demand for cars due to factors such as higher incomes and population growth can lead to a disproportionate increase in orders placed by car manufacturers to their suppliers.

Conversely, factors like rising gasoline prices, which act as a complementary good, may dampen demand. Simultaneously, supply may be affected by other variables like technological advancements, which can lower production costs, or new regulations that increase production expenses.