The Decline of Industries Such as the US Automotive Industry

question 9

Multiple Choice

The decline of industries such as the US automotive industry and the consumer electronics industry is evidence that:

• A)the abundance of competition is harmful to franchising in the US.
• B)products or services of merely average quality lose customer confidence and sales.
• C)customers do not like having such a wide range of products and services to choose from.
• D)the loss of business is usually the fault of the franchisee,not the franchisor.

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Definitions:

Substitution Effect

The financial concept stating that when prices increase or incomes drop, individuals will substitute higher-priced goods with more affordable options.

Normal Goods

Goods for which demand increases as the income of consumers increases, and falls when consumer income decreases.

Utils

A hypothetical unit of measurement used in economics to represent the satisfaction or utility that a consumer receives from consuming goods and services.

Substitution Effect

The change in consumption patterns due to a change in relative prices, where consumers replace more expensive items with less costly alternatives.