- Sun Jul 04, 2021 5:38 pm
#88489
Answer choice D is a better answer choice than A, and should be the correct answer choice. D implies that the company’s policy change was the sine qua non of their 25% increase in mail-order sales. Other things being equal, competing firms offering unlimited free shipping would have captured a portion of the market that firms not offering unlimited free shipping would have either lost or never had. If we take the factual matter of answer choice D at face value, the firm in the stimulus would have been in an economic state of lost sales and/or competitive disadvantage prior to the implementation of their free shipping policy change. That is, competing firms offering unlimited free shipping would have been able to capture mail-order sales that the firm in the stimulus was either unable to hold or capture due to its failure to offer unlimited free shipping. So when this firm changed its policy and began to offer unlimited free shipping, it adapted to the extant market conditions and made itself competitive. In this way the firm would have been able to capture or recapture mail-order sales it either previously lost or never had, and the 25% increase in sales is representative of this capture or recapture of mail-order sales resulting from the policy change.
The factual matter of answer choice A is literally implied by that of answer choice D. Mail order sales would have been decreasing for firms not offering unlimited free shipping in either factual scenario, Answer choice A only accounts specifically for firms that LOST mail-order sales to firms offering unlimited free shipping, but choice A implies absolutely nothing about the entry into the market of new firms offering unlimited free shipping from their inception. Such firms would not have lost mail-order sales they never had: they can only capture sales from firms that don’t offer unlimited free shipping. The possibility of the effect of these new firms falls within the factual matter of answer choice D; a decrease of mail-order sales for companies that don’t offer unlimited free shipping can be reasonably inferred from the factual matter of answer choice D, which states indirectly that competitors were offering unlimited free shipping WELL BEFORE the firm in the question stimulus. It’s supply and demand folks. The cost incidence of shipping goods is borne by the buyer, seller, shipper, or some combination of the three. The cost cannot be eliminated, it can only be reduced and/or shifted to some degree from one party to another. If a firm’s implementation of unlimited free shipping coincides with a 25% increase in its sales, there can be literally no other explanation for its increased sales other than the firm had a sufficient supply of goods to meet a concurrent increase in demand. The cause of the increase in sales was an increase in demand for the goods sold - period. What caused the increase in demand for the firm’s goods? Well, we know the change in the firm’s shipping policy coincided with increased sales. If the change in its shipping policy did not reduce the prices of the firm’s goods (thus meeting extant demand), then the firm’s sales increased because it was able to meet extant demand precisely at the time the firm began to offer unlimited free shipping; this implies that the firm’s competitors, regardless of whether they were offering unlimited free shipping or not, had been unable or unwilling to supply goods to the market due to (1) scarcity of supply (which would have driven up the prices of their goods), (2) lack of demand for the goods they were supplying (which occurs as a result of the market’s inability or unwillingness to purchase their goods at the prices they are asking), or both (1) and (2). Whatever the case may be, other things being equal, the firm in the question stimulus simply would not have increased its sales by 25% but for its decision to offer unlimited free shipping. Even if the firm had wrapped its entire shipping cost into the price of its goods and thus passed the entire cost of shipping onto the consumer, the firm’s increased sales could have been caused by the resultant changes in the asking prices of its goods or perhaps by a beneficial shift in the market’s perception of the firm itself due to the firm’s decision to offer unlimited free shipping to its customers, or perhaps all of the above. My point is, the precise cause or causes of the 25% increase in the firm’s sales is not more clear or more precisely deductible under the matter introduced by answer choice A than it is under the matter introduced by answer choice D, however the firm’s decision to provide unlimited free shipping does appear to be the sine qua non of the firm’s increased sales under both answer choices.