Chapter 4.3, Problem 5R

To determine

To write: A policy that should be posted by a store for consumers regarding their credit concern.

Explanation of Solution

One of the main concern of consumers is buying on credit, this sometimes is risky for consumers as many consumers are not able to repay the amount they borrowed. However, if any business does not allow consumers to buy on credit, it may lose its customers. If any business wants to retain its consumer base which buys on credit and also wants to keep its business safe from risks, the store needs to design a policy accordingly.

The credit policy that fulfills both of these challenges for a store could be as follows:

The business owner will allow only those consumers to buy on credit that has a good or average credit history but not to those who have a bad credit history. Also, the consumers can buy goods on credit up to a certain limit, at least half of the goods should be purchased in cash, and then half will be allowed on credit. The goods purchased on credit will be subject to interest rates.