DISCUSSION
QUESTION 1: Assume these circumstances for the base case run: Clothing items are initially
priced at $15 each, with a four-week inventory coverage goal and a 15-week price revision
delay.
a. What level of inventory is necessary for the system to be in balance? (Hint: Take a look
at the supply and demand price schedules.)
Discuss your reasoning
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b. Assume that everything is balanced in the system. Until the tenth week, when
there is a permanent rise in demand of 10 units, price and inventory stay
unchanged. (At each price, demand from consumers is 10 more items each week.)
What are the new price and inventory equilibrium values?
QUESTION 2: The price change delay is 15 weeks at the moment. If the delay is abruptly cut
in half, will pricing or inventory vary over time, assuming everything else stays the same (the
system is in equilibrium)?
a. Why or Why not? ____________________________________
b. Do you think the system will find equilibrium more rapidly if the time between price
changes is 15 or 30 weeks?

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