Question

Raymond Vernon noticed that in the 1960s, the wealth and size of the U.S. market was a natural incentive to develop new consumer products. What theory did he propose based on this fact?

a. new trade
b. absolute advantage
c. mercantilism
d. product life-cycle
e. comparative advantage

Answer 1

The correct answer is letter "D": product life-cycle.

Step-by-step explanation:

American economists Raymond Vernon (1913-1999) proposed the "International Product Life-Cycle" in 1966 to explain how goods and services are introduced in the market, reach a peak, to later be forgotten by consumers. According to Vernon, the cycle is composed of four (4) stages:

• The introduction stage: successful development of a product and marketing efforts.
• The growth stage: sales increase, decrease in production costs and higher revenue as a result of the product being noticed by consumers.
• The maturity stage : wide recognition of the product which brings competition driving the company's efforts to remain the business stable.
• The decline stage: market saturation which leads to sales decline and the product to become unpopular.

Answer 2

The correct answer is d) product life-cycle.

Step-by-step explanation:

The life cycle of a product is the evolution of sales of that product during its permanence in a given market. Depending on the product and the sector, its useful life may be greater or lesser. In addition, other factors also influence such as the administration's policies in the area where the product is marketed.

A product since it appears in the market does not always maintain the same sales trend. There are fluctuations that have to do with demand but can also influence other issues such as those related to legislation.

With regard to demand, it can happen, for example, that a product goes out of style or is replaced by a new one that meets the needs of the former. E.g. Think of the music player market, how many have we met? From the walkman, through the discman, then the Mp3, Mp4, Ipod, and even the mobile phone as a player. We can say that the discman, for example, had a fairly short life cycle.

In this regard in Economics there is a theory that explains the stages through which a product passes with respect to its production and sales, it is known as the theory of the life cycle of a product. It was defined by the American economist Raymond Vernon who assured that every product or service undergoes a similar market evolution.