Which of the following is a possible demand option for dealing with demand-capacity mismatches in competitive markets?

• A. Eliminating advertising entirely
• B. Offering price discounts during off-peak periods
• C. Increasing production capacity permanently
• D. Reducing the quality of the product

Answer: (B)

Verified step by step guidance

1. Understand the concept of demand-capacity mismatches: This occurs when the demand for a product or service does not align with the available supply or capacity, often leading to inefficiencies such as idle resources or unmet demand.
2. Identify common demand management strategies in competitive markets: These include adjusting prices, changing product quality, modifying advertising, or altering production capacity.
3. Evaluate the option 'Eliminating advertising entirely': Removing advertising usually reduces demand overall, which might not be a strategic way to manage demand fluctuations, especially during off-peak periods.
4. Consider 'Offering price discounts during off-peak periods': This is a classic demand management tool where lower prices incentivize consumers to shift their demand to times when capacity is underutilized, smoothing demand over time.
5. Analyze 'Increasing production capacity permanently' and 'Reducing the quality of the product': Increasing capacity is a supply-side solution, not a demand option, and reducing quality may harm demand rather than manage it effectively.