Consider the Pricing Strategy Outlined in the Excerpt Below

question 137

Multiple Choice

Consider the pricing strategy outlined in the excerpt below. Taking full advantage of the law of supply and demand, the Coca-Cola Company has quietly begun testing a vending machine that can automatically raise prices for its drinks in hot weather. "This technology is something the Coca-Cola Company has been looking at for more than a year," said Rob Baskin, a company spokesman, adding that it had not yet been placed in any consumer market. . . . The process appears to be done simply through a temperature sensor and a computer chip, not any breakthrough technology, though Coca-Cola refused to provide any details yesterday. While the concept might seem unfair to a thirsty person, it essentially extends to another industry what has become the practice for airlines and other companies that sell products and services to consumers. The falling price of computer chips and the increasing ease of connecting to the Internet has made it practical for companies to pair daily and hourly fluctuations in demand with fluctuations in price-even if the product is a can of soda that sells for just 75 cents.
Source: Constance L. Hays, "Variable-Price Coke Machine Being Tested," New York Times, October 28, 1999, C1.
If a "smart vending machine" were placed outside your classroom and it took other factors in addition to temperature into account when setting its price, what would likely happen to prices for caffeinated beverages during spring semester's exam week?

• A) Because most students elect to attend class during exam week, we expect lower demand for cola.
• B) Because students tend to run out of funds near the end of the academic year, we expect them to be very insensitive to changes in price.
• C) Because demand for chemical alertness would likely be higher during this time and the weather would be warmer, we expect the price of cola to be higher.
• D) Because this is an area that students visit on a regular basis, we expect them to notice the fluctuating prices and make alternative plans if they have price-inelastic demand.
• E) Because the supply of cola is consistent from week to week, we expect the demand for cola to remain unchanged.

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Cataracts

A clouding of the eye's natural lens, leading to a decrease in vision and, if untreated, potentially resulting in blindness.

Fixate

To focus one's eyes or attention on a specific object or point without moving.

Pupillary Light Reflex

A reflex that controls the diameter of the pupils in response to the intensity of light that falls on the retinal surface, serving to protect the eyes from intense light.

Visual Fields

The total area in which objects can be seen in the peripheral vision while the eye is focused on a central point.