What Is Wrong with the 80-20 Scheme

question 36

Multiple Choice

What is wrong with the 80-20 scheme?

• A) It does not consider the differences between 80 percent and the 20 percent
• B) Customers who are labelled could change and future advertising misses them
• C) It does not consider the differences among the 80 percent in the "rest" segment
• D) It does not break down the variables within the remaining 20 percent
• E) It is too broad to segment customers in this way

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Definitions:

Binding Price Floor

A binding price floor is a government-imposed limit on how low a price can be charged for a product or service, set above the equilibrium price, leading to potential surpluses.

Surplus

The excess of supply over demand in a market, resulting in lower prices.

Shortage

A situation in which demand for a product exceeds its supply in a market.

Price Floor

A government- or authority-imposed minimum price that can be charged for a particular good or service, intended to prevent prices from falling below a certain level.