Figure 7.1. Defending the Target Price in Face of Changing Demand Conditions

-Consider Figure 7.1.Suppose the demand for tin decreases from D? to D?.Under a buffer stock system,the buffer-stock manager could maintain the target price by:
A) Selling 15 pounds of tin
B) Selling 30 pounds of tin
C) Buying 15 pounds of tin
D) Buying 30 pounds of tin

Question

Figure 7.1. Defending the Target Price in Face of Changing Demand Conditions
 
-Consider Figure 7.1.Suppose the demand for tin decreases from D? to D?.Under a buffer stock system,the buffer-stock manager could maintain the target price by:
A) Selling 15 pounds of tin 
B) Selling 30 pounds of tin 
C) Buying 15 pounds of tin 
D) Buying 30 pounds of tin

Quizplus · Accepted Answer

To maintain the target price when demand decreases, the buffer-stock manager should buy tin to reduce supply and support the price. Buying 30 pounds of tin would be necessary to counteract the decrease in demand and maintain the target price.

Figure 71 Defending the Target Price in Face of Changing Demand