Question

In response to the increasing demand for electronic gadgets with advanced capabilities, Ziff Corp., an electronic gadget manufacturer, has increased its inventories and plant capacity in order to meet the demand. This increase in inventories and plant capacity due to an increase in demand for electronic gadgets can be best explained by _____.​

the acceleration principle (T/F)

Answer 1

True

Step-by-step explanation:

The acceleration principle/effect draws a connection between changing consumption patterns and capital investment. It states that if appetite for consumer goods increases, demand for equipment and other investments necessary to make these goods will grow even more. In other words, if a population's income increases and its residents, as a result, begin to consume more, there will be a corresponding but magnified change in investment.

Companies like Ziff Corp. frequently seek to gauge how much demand there is for their product - electronic gadgets. They noticed that economic conditions are improving and consumption is growing at a sustainable rate, they have invest to increase their output, particularly now they are already running close to full capacity. Failure to do so could see them miss out on a chunk of potential future revenues and lose ground to faster-responding competitors.