How Can the Use of an EDLP Strategy Increase a Retailer's

question 5

Multiple Choice

How can the use of an EDLP strategy increase a retailer's profit margin?

• A) The stable prices caused by EDLP requires the use of more weekly advertising
• B) Employees provide less customer service because of the sale-stimulated numbers of people
• C) EDLP increases the large variations in demand caused by frequent sales
• D) Employees do not have to continually make price reductions
• E) A more predictable demand increases the likelihood of stockouts

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Definitions:

Risk Premium

The additional return expected by an investor for taking on a higher level of risk.

Nominal Interest Rate

The rate of interest before adjustment for inflation, representing the face value of interest payments.

Real Rate of Interest

The interest rate adjusted for inflation, reflecting the true cost of borrowing.

Interest Rate Components

The factors that determine the total interest rate charged by lenders, which can include the base rate, margin, fees, and other costs.