Suppose that you were interested in building a new townhome community on the east side of University City that will be marketed exclusively to senior citizens above the age of 62. In your analysis of local demographics, you discover that the target market makes up only 10% (core market share) of the households that currently live in this city. If market experts believe that a total of 500 townhome (or similar condominium) units will be purchased in all of University City within the next year, what is the projected number of units the developer could expect to sell in year 1 if he is able to capture 40% of the market potential?
A) 500 units
B) 50 units
C) 20 units
D) 10 units

Question

Quizplus · Accepted Answer

To calculate the projected number of units the developer could sell in year 1, we need to use the following formula:

Projected units sold = Market potential x Core market share x Capture rate

Market potential = Total number of townhome units that will be purchased in all of University City within the next year = 500 units
Core market share = Percentage of households in University City that belong to the target market = 10%
Capture rate = Percentage of the target market that the developer will be able to capture = 40%

Plugging in the numbers, we get:

Projected units sold = 500 x 10% x 40% = 20 units

Therefore, the developer can expect to sell 20 townhome units in the first year of the new community. The correct answer is C.

Suppose That You Were Interested in Building a New Townhome