Final answer:
Jackie Conrad proposes increasing inventory to boost order fulfillment from 85% to 90%, accepting higher inventory costs to enhance customer service. This trade-off reflects a strategic business decision focused on customer satisfaction rather than price adjustments based on elasticity.
Step-by-step explanation:
Jackie Conrad proposes to increase the quantity of inventory to a five-week supply to raise the percentage of completely filled customer orders from 85 percent to 90 percent. She suggests that she is willing to trade off the higher costs associated with carrying additional inventory for the benefit of improved customer service.
In a business context, carrying more inventory can lead to higher storage costs, potential spoilage, and capital being tied up in inventory rather than invested elsewhere. However, the ability to fulfill more orders can lead to customer satisfaction and loyalty, potentially outweighing the costs.
Reflecting on supply and demand, businesses have elasticities to consider when adjusting prices. An elasticity of 1 suggests a balanced scenario where an increase in price equals the percentage decrease in units sold, maintaining the same total revenue. However, in Jackie's case, the focus is on stocking higher inventory to satisfy rising demand and improve service quality rather than adjusting prices.