You are a pricing analyst at Panaviewic in the HD TV group. Your supervisor asks you to forecast the demand curves for 42-inch HD TVs over both a one-month and a one-year time horizon. You present your supervisor with a graph. Using the concept of elasticity, shift the points to label each demand curve with the correct time horizon. Your supervisor asks you to explain the implications of your forecasted demand curves on monthly and future pricing decisions. What is your response? Customers will not respond to price changes in either case. The TVs should be priced at $0. Customers will be more responsive to price increases over a shorter period of time but will become less responsive over the longer term. Customers will be less responsive to price increases over a shorter period of time but will become more responsive over the longer term.
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It can show us how sensitive consumers are to price changes over different time horizons. Generally, in the short term, consumers are less responsive to price changes because they have less time to adjust their behavior. Over the long term, consumers are more Show more…
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