Category: Economics

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➤ Why is CES a strong predictor of customer loyalty?
CES predicts loyalty because customers who expend less effort are more likely to stay and repurchase. High-effort experiences increase churn risk and negative word-of-mouth. Measuring effort highlights removable friction in channels, policies, or systems. Improving CES raises retention, lifetime value, and reduces support costs by smoothing the customer journey at critical touchpoints.

2. Why did world goods trade increase so much after 2000?
Several forces drove the expansion: China’s rapid integration into manufacturing, trade liberalization, lower transport and communication costs, and expanded global value chains. Rising incomes in emerging markets raised demand for consumer goods and commodities, while foreign direct investment and multinational sourcing increased cross-border production and shipments.

➤ How does monopolistic competition explain rideshare firms’ pricing and differentiation?
In monopolistic competition firms set prices above marginal cost due to brand and feature differences. Rideshare apps use surge pricing, promotions, and service tiers to balance supply and demand. They invest in user experience and driver incentives to attract users, which increases short-run profits but invites entry and long-run competitive pressure.

➤ When might that 10% → 20% relationship not hold in the real market?
The rule may fail under tight short-run supply, rising interest rates, or strict credit standards. Local market differences, seasonal cycles, and regulatory barriers also change responsiveness. Always test elasticity with recent, localized data before applying it to pricing strategies or housing policy decisions.