Case Study: Starting a Business — Unit test

Question 11 • 2102320-Economics HONORS - Edgenuity Teacher

Which scenario is an example of market saturation?

Answer

The single coffee shop in town usually has a long line of customers and tends to stay busy during business hours.

There are three shoe stores on one block in town, and they have trouble finding customers and making a profit.

A second health club will open because the only health club in town is too crowded to accept new customers.

It can be difficult to get reservations at the only upscale Ethiopian restaurant in town, and it is best to call in advance.

Explanation

Market saturation occurs when there are more businesses selling similar products or services than the market can support profitably. In B, three shoe stores are competing on the same block and struggling to find customers and make a profit, which is a sign the market is saturated. The other scenarios describe businesses with strong demand or room for another business.

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