A fast food chain has determined that for every $1 spent by a 'light user,' each 'heavy user' spends $5.Which statement best describes this situation?
A)Eighty percent of a firm's inventory should be readily available, and twenty percent should be reserved for emergency demand.
B)Eighty percent of a firm's first time users will become brand loyal and twenty percent of the firm's first time users will use the product only once.
C)Eighty percent of a firm's sales are obtained from twenty percent of its customers.
D)Eighty percent of a firm's expenditures are tax deductible and twenty percent are not.

Question

Quizplus · Accepted Answer

This situation describes the Pareto Principle, also known as the 80/20 rule, which states that 80 percent of a firm's sales are obtained from 20 percent of its customers. The fact that heavy users spend five times more than light users reinforces this principle, showing that a small group of customers (the heavy users) contribute a disproportionately large amount to the firm's sales.

A Fast Food Chain Has Determined That for Every $1