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Contemporary Marketing 16th Edition by Louis Boone,David Kurtz
Edition 16ISBN: 978-1133628460Contemporary Marketing 16th Edition by Louis Boone,David Kurtz
Edition 16ISBN: 978-1133628460 Exercise 13
Does an object that costs more to make than it's worth have any value in today's economy? If the object is the U.S. penny, a growing consensus says "no."
Canada will soon stop producing its penny, following the lead of Australia, New Zealand, Brazil, Norway, Switzerland, Finland, and Britain, which all dropped their lowest-valued coins from circulation with no ill effects. And Canada's penny wasn't as big of a drain on the country's treasury as the U.S. penny. It cost only 1.6 cents to make, whereas the U.S. penny-a copper plate covered by a 99 percent zinc core-cost taxpayers 2.4 cents each. In one recent year, the U.S. Treasury spent $60 million minting pennies, more than double the cost in 1982, all for coins that have no real purchasing power
Canada's government will ask citizens to bring unwanted pennies to banks to be melted down or donated to charities. Canadians who want to continue using the pennies still in circulation are free to do so. They will have fewer opportunities than before, however, since cash sales will be rounded to the nearest five cents.
The zinc industry wants to keep supplying raw material to the U.S. government, of course, but as the cost of zinc keeps rising, some people feel it's time to follow Canada's example and simply eliminate the penny, saving the government the cost of manufacturing it and diverting the metal to some other, better use.
Other people worry that, if all prices are rounded up to the nearest nickel, rather than down, those most affected will be the poor. Others feel that rounded prices will acquire what economists call "stickiness" and resist further increases (which would have to be at least 5 cents) for a few years, thus helping all consumers. "A 99-cent price might go down to 95 cents rather than up to $1 to avoid crossing that higher price threshold," says a senior economist at the Federal Reserve.
QUESTIONS FOR CRITICAL THINKING
1. What do you think would happen to retail prices if the United States withdrew the penny from circulation? Why?
2. Some observers suggest eliminating the nickel as well, since each one costs more than 11 cents to make and distribute. Do you agree, and why or why not? What would be the effect of such a decision on prices?
Canada will soon stop producing its penny, following the lead of Australia, New Zealand, Brazil, Norway, Switzerland, Finland, and Britain, which all dropped their lowest-valued coins from circulation with no ill effects. And Canada's penny wasn't as big of a drain on the country's treasury as the U.S. penny. It cost only 1.6 cents to make, whereas the U.S. penny-a copper plate covered by a 99 percent zinc core-cost taxpayers 2.4 cents each. In one recent year, the U.S. Treasury spent $60 million minting pennies, more than double the cost in 1982, all for coins that have no real purchasing power
Canada's government will ask citizens to bring unwanted pennies to banks to be melted down or donated to charities. Canadians who want to continue using the pennies still in circulation are free to do so. They will have fewer opportunities than before, however, since cash sales will be rounded to the nearest five cents.
The zinc industry wants to keep supplying raw material to the U.S. government, of course, but as the cost of zinc keeps rising, some people feel it's time to follow Canada's example and simply eliminate the penny, saving the government the cost of manufacturing it and diverting the metal to some other, better use.
Other people worry that, if all prices are rounded up to the nearest nickel, rather than down, those most affected will be the poor. Others feel that rounded prices will acquire what economists call "stickiness" and resist further increases (which would have to be at least 5 cents) for a few years, thus helping all consumers. "A 99-cent price might go down to 95 cents rather than up to $1 to avoid crossing that higher price threshold," says a senior economist at the Federal Reserve.
QUESTIONS FOR CRITICAL THINKING
1. What do you think would happen to retail prices if the United States withdrew the penny from circulation? Why?
2. Some observers suggest eliminating the nickel as well, since each one costs more than 11 cents to make and distribute. Do you agree, and why or why not? What would be the effect of such a decision on prices?
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Contemporary Marketing 16th Edition by Louis Boone,David Kurtz
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