Question

Identify the monthly income of the potential market and multiply the income with the portion of income spent on the proposed product. Another way of doing this is to identify that actual amount spent on the product per unit. The data to be used shall come from the survey. If the proposed product does not exist in the market, the proponents may choose a similar product line or category.

Answer 1

The question is about identifying market potential by analyzing household incomes and expenditure on a product using survey data.

It involves understanding consumer behavior and calculating consumption using the marginal propensity to consume and a base consumption level.

Step-by-step explanation:

The question focuses on calculating the market potential and consumer behavior for a proposed product by analyzing household income and the portion spent on similar products.

To assess this, one would need to identify the monthly income of the target market and the proportion of this income that is typically spent on a given product category.

This information can be derived from surveys. If the product is new and no direct data is available, similar products or categories should be used for analysis.

Furthermore, the propensity to consume can be calculated by multiplying income levels with the marginal propensity to consume rate (stated as 0.8 in the examples) and adding a constant amount that represents consumption at zero income (given as $600).

Once data collection has been completed, it's important to analyze and interpret the data to gain insights such as the median price and price variation for business analysis and strategy formulation.