3.The following appeared in a memo from the new vice president of Sartorian, a company that manufactures mens clothing.
Five years ago, at a time when we had difficulties in obtaining reliable supplies of high-quality wool fabric, we discontinued production of our deluxe alpaca overcoats. Now that we have a new fabric supplier, we should resume production. This coat should sell very well: since we have not offered an alpaca overcoat for five years and since our major competitor no longer makes an alpaca overcoat, there will be pent-up customer demand. Also, since the price of most types of clothing has risen in each of the past five years, customers should be willing to pay significantly higher prices for alpaca overcoats than they did five years ago, and our company profits will increase.
4.The following appeared in a memo from the president of a company that builds and sells new homes in Steel City.
Over the past five years, the population of Steel City has increased by more than 20 percent, and family incomes in Steel City have risen much faster than the national average. Nationwide, sales of houses priced above $150,000 have increased more than have sales of lower-priced houses. Such data indicate that we should make changes in our business to increase company profits. First, we should build fewer low-priced houses than we did last year and focus instead on building houses designed to sell at above $150,000. Second, we should hire additional workers so that we can build a larger total number of houses than we did last year.
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