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Triple Limited Demand

Triple Limited Demand

And he writhed inside at what seemed the cruelty and unfairness of the demand – C.L. Lewis.

Many products sink due to scarce sales. Uninspected, market boundaries seem murky.

Pilatus makes the PC-12. It’s the best-selling business aircraft model (1st limit). Part of its appeal is that, by some measures (not shown), it sells for less than what it could command. The relatively low price boosts sales and shapes the statistically significant (P-value 1.5%) Outer Demand Frontier, a saturation limit the market collectively creates.

In 1981 car buyers revealed a Product Demand Curve (P-value 2.00E-05), a term applied to all models (2nd limit). If a given model were popular enough (as the Porsche 911C and BMW 528i), it would eventually find itself limited by the Upper Demand Frontier (P-value 0.01%), as it helps form a communal price limitation.

If a Product Demand (Price) Curve is steeper (more negative) than its related Unit (Recurring) Cost Curve, they may eventually intersect. If cost >= price, a line stops, as it is no longer be profitable, as was the case for the Ford Model T (3rdlimit).

In 1, the Pilatus PC-12 sells at a Price less than its estimated Value, boosting sales and reaching its market’s Outer Demand Frontier, but facing saturation limits. The Porsche 911SC and BMW 528i Product Demand Curves slopes are flatter than their market’s Demand Frontier (2); production stops at that Frontier. The Model T had wide profit margins that narrowed. Ford ended its production when cost matched price (3).

 

Doug Howarth
CEO, Hypernomics, Inc.

Board Member SOCE

 

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