How Do Businesses Solve the Surplus Problem

How Do Businesses Solve the Surplus Problem - absorb the...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
How Do Businesses Solve the Surplus Problem? There were many ways to solve the problem of surpluses. 1. Occasionally, a store simply broke the manufacturer's policy . The store lowered the price to get rid of the surplus. The manufacturer had threatened that the store would be prohibited from selling the manufacturer's product; the store either believed that the manufacturer would not carry-out the threat or did not care. For example, Crown Books began lowering the prices of its books and a company called Discount Records began lowering the prices of phonograph records. 2. More likely, stores would try to get around the price floor without actually violating. (a) One common solution was to provide more service for the same money . Stereo stores could add free CDs or other free accessories. Washing machine stores used to virtually give away the dryer. Gas stations gave away glasses, knives, and Blue Chip Stamps. (b) A second solution was to simply
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: absorb the surplus . Your textbook producers would have a surplus of textbooks. At the end of each edition, the books would be returned to the publisher and the paper was recycled. (c) A third solution was to change the name of the product in order to reduce the price. Surplus gasoline was sold to independent dealers who would sell it as Thrifty, 7-11, or Discount Gas at a lower price. Surplus liquor was bottled with a different label and sold as Slim Price, or Yellow Wrap at a lower price. Surplus washing machines and refrigerators were sold, for example, to Sears and marketed as Kenmore at a lower price. When automobiles were fair-traded, the dealers could not lower the price; however, they would give a trade-in value that was much greater than the trade-in car was actually worth. The main point here is that, even if someone interferes with the market process, there are powerful forces to return to equilibrium...
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern