• TABLE OF CONTENTS
HIDE
 Title Page
 Credits
 Table of Contents
 Acknowledgement
 Introduction
 Purpose
 Procedure
 Description of stories
 Volume of oranges handled
 Customer response to varying price...
 Evaluation of results
 Summary
 Explanation of statistical...














Group Title: Bulletin - University of Florida. Agricultural Experiment Station ; no. 508
Title: Customer response to varying prices for Florida oranges
CITATION THUMBNAILS PAGE IMAGE ZOOMABLE
Full Citation
STANDARD VIEW MARC VIEW
Permanent Link: http://ufdc.ufl.edu/UF00027291/00001
 Material Information
Title: Customer response to varying prices for Florida oranges
Series Title: Bulletin University of Florida. Agricultural Experiment Station
Physical Description: 24 p. : ill. ; 23 cm.
Language: English
Creator: Godwin, Marshall R ( Marshall Reid ), 1922-
Publisher: University of Florida Agricultural Experiment Station
Place of Publication: Gainesville Fla
Publication Date: 1952
 Subjects
Subject: Oranges -- Prices -- Florida   ( lcsh )
Oranges -- Marketing -- Florida   ( lcsh )
Genre: government publication (state, provincial, terriorial, dependent)   ( marcgt )
non-fiction   ( marcgt )
 Notes
Statement of Responsibility: by Marshall R. Godwin.
General Note: Cover title.
 Record Information
Bibliographic ID: UF00027291
Volume ID: VID00001
Source Institution: University of Florida
Rights Management: All rights reserved by the source institution and holding location.
Resource Identifier: aleph - 000925797
oclc - 18267408
notis - AEN6453

Table of Contents
    Title Page
        Page 1
    Credits
        Page 2
        Page 3
    Table of Contents
        Page 4
    Acknowledgement
        Page 4
    Introduction
        Page 5
    Purpose
        Page 6
    Procedure
        Page 7
        Page 8
        Page 9
    Description of stories
        Page 10
    Volume of oranges handled
        Page 11
    Customer response to varying price levels
        Page 12
        Page 13
        Page 14
        Page 15
        Page 16
        Page 17
    Evaluation of results
        Page 18
    Summary
        Page 19
        Page 20
    Explanation of statistical procedure
        Page 21
        Page 22
Full Text



December 1952


UNIVERSITY OF FLORIDA
AGRICULTURAL EXPERIMENT STATIONS
WILLARD M. FIFIELD, Director
GAINESVILLE, FLORIDA













Customer Response to Varying Prices for

Florida Oranges

By MARSHALL R. GODWIN
Associate Marketing Economist


















Single copies free to Florida residents on request to
AGRICULTURAL EXPERIMENT STATION
GAINESVILLE, FLORIDA


Bulletin 508









BOARD OF CONTROL

Frank M. Harris, Chairman, St. Petersburg
Hollis Rinehart, Miami
Eli H. Fink, Jacksonville
George J. White, Sr., Mount Dora
Mrs. Alfred I. duPont, Jacksonville
George W. English, Jr., Ft. Lauderdale
W. Glenn Miller, Monticello
W. F. Powers, Secretary, Tallahassee
EXECUTIVE STAFF
J. Hillis Miller, Ph.D., Prcsident
J. Wayne Reitz, Ph.D., Provost for Agr.8
Willard M. Fifield, M.S., Director
J. R. Beckenbach, Ph.D., Asso. Director
L. O. Gratz, Ph.D., Assistant Director
Rogers L. Bartley, B.S., Admin. Mgr.s
Geo. R. Freeman, B.S., Farm Superintendent

MAIN STATION, GAINESVILLE

AGRICULTURAL ECONOMICS
H. G. Hamilton, Ph.D., Agr. Economist 1
R. E. L. Greene, Ph.D., Agr. Economist
M. A. Brooker, Ph.D., Agr. Economist 3
Zach Savage, M.S.A., Associate
A. H. Spurlock, M.S.A., Associate
D. E. Alleger, M.S., Associate
D. L. Brooke, M.S.A., Associate4
M. R. Godwin, Ph.D., Associate3
H. W. Little, M.S., Assistant4
W. K. McPherson, M.S., Economist
Eric Thor, M.S., Asso. Agr. Economist
J. L. Tennant, Ph.I., Agr. Economist
Cecil N. Smith, M.A., Asso. Agr. Economist
Levi A. Powell, Sr., M.S.A., Assistant
Orlando, Florida (Cooperative USDA)
G. Norman Rose, B.S., Asso. Agri. Economist
J. C. Townsend, Jr., B.S.A., Agricultural
SRtntitician 2
J. B. Owens, B.S.A., Agr. Statistician 2
J. K. Lankford, B.S., Agr. Statistician

AGRICULTURAL ENGINEERING
Frazier Rogers, M.S.A., Agr. Engineer s
J. M. Johnson, B.S.A.E., Agr. Eng.3
J. M. Myers, B.S., Asso. Agr. Engineer
J. S. Norton, M.S., Asst. Agr. Eng.
AGRONOMY
Fred H. Hull, Ph.D., Agronomist 2
G. B. Killinger, Ph.D., Agronomist
H. C. Harris, Ph.D., Agronomist
R. W. Bledsoe, Ph.D., Agronom:st
W. A. Carver, Ph.D., Associa.e
Darrel D. Morey, Ph.D., Associate 2
Fred A. Clark, M.S., Assistant2
Myron C. Grennell, B.S.A.E., Assistant4
E. S. Horner, Ph.D., Assistant
A. T, Wallace, Ph.D., Assistant'
D. E. McCloud, Ph.D., Assistant 3
E. C. Nutter, Ph.D., Asst. Agronomist

ANIMAL HUSBANDRY AND NUTRITION
T. J. Cunha, Ph.D., An. Husb.1 3
G. K. Davis, Ph.D., Animal Nutritionist 8
S. John Folks, Jr., M.S.A., Asst. An. Husb.
Katherine Boney, B.S., Asst. Chem.
A. M. Pearson, Ph.D., Asso. An. Husb.3
John P. Feaster, Ph.D., Asst. An. Nutri.
H. D. Wallace, Ph.D., Asst. An. Husb. h
M. Koger, Ph.D., An. Husbandman 3
F. F. Johnston, M.S.. Asst. An. Husbandman
J. F. Hentges, Jr., Ph.D., Asst. An. Husb.
DAIRY SCIENCE
E. L. Fouts, Ph.D, Dairy Tech.' 3
R. B. Becker, Ph.D., Dairy Husb.3
S. P. Marshall, Ph.D., Asso. Dairy Husb.5
W. A. Krienke, M.S., Asso. Dairy Tech.3
P. T. Dix Arnold, M.S.A., Asst. Dairy Husb."
Leon Mull. Ph.D., Asso. Dairy Tech.
H. H. Wilkowske, Ph.D., Asst. Dairy Tech.
James M. Wing, M.S.. Asst. Dairy Huhb.


EDITORIAL
J. Francis Cooper, M.S.A., Editor
Clyde Beale, A.B J., Associa e Editor
L. Odell Griffith, B.A.J., Asst. Editor 3
J. N. Joiner, B.S.A., Assistant Editor 3
William G. Mitchell, A.B., Assistant Editor

ENTOMOLOGY
A. N. Tissot, Ph.D., Entomologist'
L. C. Kuitert, Ph.D., Associate
H. E. Bratley, M.S.A., Assistant
F. A. Robinson, M.S., Asst. Apiculturist
R. E. Waites, Ph.D., Asst. Entomologist

HOME ECONOMICS
Ouida D. Abbott, Ph.D., Home Econ.1
R. B. French, Ph.D., Biochemist

HORTICULTURE
G. H. Blackmon, M.S.A., Horticulturist '
F. S. Jamison, Ph.D., Horticulturist 3
Albert P. Lorz, Ph.D., Horticulturist
R. K. Showalter, M.S., Asso. Hort.
R. A. Dennison, Ph.D., Asso. Hort.
R. H. Sharpe, M.S., Asso. Horticulturist
V. F. Nettles, Ph.D., Asso. Horticulturist
F. S. Lagasse, Ph.D., Asso. Hort.2
R. D. D'ckey, M.S.A., Asso. Hort.
L. H. Halsey. M.S.A., Asst. Hort.
C. B. Hall, Ph.D Asst. Horticulturist
Austin Griffiths, Jr, B.S., Asst. Hort.
S. E. McFadden, Jr., Ph.D., Asst. Hort.
C. H. VanMiddelem, Ph.D., Asst. Biochemist
Buford Thompson, M.S.A., Asst. Hort.
James Montelaro, Ph.D., Asst. Horticulturist

LIBRARY
Ida Keeling Cresap, Librarian

PLANT PATHOLOGY
W. B. Tisdale, Ph.D., Plant Pathologist '
Phares Decker, Ph.D Plant Pathologist
Erdman West, M.S., Mycolovist and Botanist
Robert W. Earhart, Ph.D., Plant Path.2
Howard N. Miller, Ph.D., Asso. Plant Path.
Lillian E. Arnold, M.S., Asst. Botanist
C. W. Anderson, Ph.D., Asst. Plant Path.

POULTRY HUSBANDRY
N. R. Mehrhof, M.Agr., Poultry Hu'ih. s
J. C. Driggers, Ph.D., Asso. Poultry Husb.

SOILS
F. B. Smith, Ph.D., Microbiologist 3
Gaylor I M. Volk, Ph.D., Soils Chemist
J. R. Neller, Ph.D.. Soils Chemist
Nathan Gammon, Jr., Ph.D., Soils Chemist
Ralph G. Leighty. B.S., Asst. Sil Surveyors
G. D. Thornton, Ph.D., Asso. Microbiologist
Charles F. Eno, Ph.D., Asst. Sails Micro-
biologist 4
H. W. Winsor, B.S.A., Assistant Chemist
R. E. Caldwell, M.S.A., Asst. Chemists3
V. W. Carlisle. B.S., Asst. Soil Surveyor
J. H. Walker, M.S.A., Asst. Soil Surveyor
S. N. Edson, M. S., Asst. Soil Surveyor 3
William K. Robertson, Ph.D., Asst. Chemist
0. E. Cruz, B.S.A., Asst. Soil Surveyor
W. G. Blue, Ph.D, Asst. Biochemist
J. G A. F'skel, Ph.D., Asst. Biochemist
H. F. Ross, B.S, Soils Microbiologist
L. C. Hammondl, Ph.D., Asst. Soil Physicist
Ie. L. Breland, Ph.D., Asst. Soils Chem.

VETERINARY SCIENCE
D. A. Sanders. D.V.M., Veterinarian
M. W. Emmel, I.V.M., Veterinarian '
C. F. Simpson, D.V.M., Asso. Veterinarian
L.. E. S-vanson, D.V.M., Parasitologist
G'enn Van Ness, D.V.M., Asso. Poultry
Path'oo-ist
W. R. Dennis. D.V.M.. Asst. Parasitologist
E. W. Swarthout, D.V.M., Poultry
Pathologist










BRANCH STATIONS

NORTH FLORIDA STATION, QUINCY

W. C. Rhoades, Jr., M.S., En omologist in
Charge
R. R. Kincaid, Ph.D., Plant Pathologist
L. G. Thompson, Jr., Ph.D., Soils Chemist
W. H. Chapman, M.S., Asso. Agronomist
Frank S. Baker, Jr., B.S., Asst. An. Hush.
T. E. Webb, B.S.A., Asst. Agronomist
Frank E. Guthrie, Ph.D., Asst. Entomologist
Mobile Unit, Monticello
R. W. Wallace, B.S., Associate Agronomist
Mobile Unit, Marianna
R. W. Lipscomb, M.S., Associate Agronomist
Mobile Unit, Pensaco'a
R. L. Smith, M.S., Associate Agronomist
Mobile Unit, Chipley
J. B. White, B.S.A., Associate Agronomist

CITRUS STATION, LAKE ALFRED
A. F. Camp, Ph.D., Vice-Director in Charge
W. L. Thompson, B.S., Entomologist
R. F. Suit, Ph.D., Plant Pathologist
E. P. Ducharme, Ph.D., Assu. Plant Path.
C. R. Stearns, Jr., B.S.A., Asso. Chemist
J. W. Sites, Ph.D., Horticulturist
H. O. Sterling, B.S., Ass:. Horticulturist
H. J. Reitz, Ph.D., Horticulturist
Francine I'ister, M.S., Asst. Plant Path.
1. W. Wander, Ph.D., Soils Chemist
J. W. Kesterson, M.S., Asso. Chemist
R. Hendrickson, B.S., Asst. Chemist
Ivan Stewart, Ph.D., Asst. Biochemist
D. S. Prosscr, Jr., B.S., Asst. Horticulturist
R. W. Olsen, B.S., Biochemist
F. W. Wenzel, Jr., Ph.D., Chemist
Alvin H. Rouse, M.S., Asso. Chemist
H. W. Ford, Ph.D., Asst. Horticulturist
L. C. Knorr, Ph.D., Asso. Histologist4
R. M. Pratt, Ph.D., Asso. Ent.-Pathologist
J. W. Davis, B.S.A., Asst. in Ent.-Path.
W. A. Simanton, Ph.D., Entomologist
E. J. Deszyck, Ph.D., Asso. Horticulturist
C. D. Leonard, Ph.D., Asso. Horticulturist
W. T. Long, M.S., Asst. Horticulturist
M. H. I luma, Ph.D., Asso. En omulogist
F. J. Reynolds, Ph.D., Asso. Hort.
W. F. Spencer, Ph.D., Asst. Chem.
I. H. Holtsberg, B.S.A., Asst. Ento.-Path.
K. G. Townsend, B, B..A., Asst. Ento.-Path.
J. B. Weeks, B.S., Asst. Entomologist
R. B. Johnson, M.S., Asst. Entomologist
W. F. Newhall, Ph.D., Asst. Biochem.
W. F. Grierson-Jackson, Ph.D., Asst. Chem.
Roger Patrick, Ph.D., Bacteriologist
Marion F. Oberbachebar, Ph.D., Asst. Plant
Physiologist
Evert J. Elvin, B.S., Asst. Horticulturist
EVERGLADES STATION, BELLE GLADE
W. T. Forsee, Jr., Ph.D., Chemist Acting in
Charge
R. V. Allison, Ph.D., Fiber Technologist
Thomas Bregger, Ph.D., Physiologist
J. W. Randolph, M.S., Agricultural Engr.
R. W. Kidder, M.S., Asso. Animal Husb.
C. C. Seale, Associate Agronomist
N. C. Hayslip, B.S.A., Asso. EntomPlogist
E. A. Wolf, M.S., Asst. Horticulturist
W. H. Thames, M.S., Asst. Entomologist
W. N. S owner, Ph.D., Asst. Plant Path.
W. G. Gerung. B.S.A., Asst. Entomologist
Frank V. Stevenson, M.,. Asso. Plant Path.
RoLert J. Allen, Ph.D., Asst. Agronomist
V. E. Green, Ph.D., Asst. Agronomist
J. F. Darby, Ph.D., Asst. Plant Path.
H. L. Chapman, Jr., M.S.A., Asst. An. Hu .'b.
Thos. G. Bowery, Ph.D., Asst. Entomologist
V. L. Guzman, Ph.D., Asst. Hort.
M. R. Bedsole, M.S.A., Asst. Chem.
J. C. Stephens, B.S., Drainage Engineer 2
A. E. Kretschmer, Jr., Ph.D., Asst. Soils
Chem.


SUB-TROPICAL STATION, HOMESTEAD
Geo. D. Ruehle, Ph.D., Vice-Dir. in Charge
D. O. Wolfenbarger, Ph.D., Entomalogist
Francis B. Lincoln, Ph.D., Horticulturist
Robert A. Conover, Ph.D., Plant Path.
John L. Malcolm, Ph.D., Asso. Soils Chemist
R. W. Harkness, Ph.D., Asst. Chemist
R. Bruce Ledin, Ph.D., Asst. Hort.
J. C. Noonan, M.S., Asst. Hort.
M. H. Gallatin, B.S., Soil Conservationist

WEST CENTRAL FLORIDA STATION,
BROOKSVILLE
William Jackson, B.S.A., Animal Husband-
man in Charge 2

RANGE CATTLE STATION, ONA
W. G. Kirk, Ph.D., Vice-Director in Charge
E. M. Hodges, Ph.D., Agronomist
D. W. Jones, M.S., Asst. Soil Technologist

CENTRAL FLORIDA STATION, SANFORD
R. W. Ruprecht, Ph.D., Vice-Dir. in Charge
J. W. Wilson. Sc.D., Entomologist
P. J. Westgate, Ph.D., Asso. Hort.
Ben. F. Whitner, Jr., B.S.A., Asst. Hort.
Geo. Swank, Jr., Ph.D., Asst. P;ant Path.

WEST FLORIDA STATION, JAY
C. E. Hutton, Ph.D., Vice-Director in Charge
H. W. Lundy, B.S.A., Associate Agronomist
W. R. Langford, Ph.D., Asst. Agronomist

SUWANNEE VALLEY STATION,
LIVE OAK
G. E. Ritchey, M.S., Agronomist in Charge

GULF COAST STATION, BRADENTON
E. L. Spencer, Ph.D., Soils Chemist in Charge
E. G. Kelsheimer, Ph.D., Entomologist
David G. A. Kelbert, Asso. Horticulturist
Robert 0. Magic, Ph.D., Plant Pathologist
J. M. Walter, Ph.D., Plant Pathologist
Donald S. Burgis, M.S.A., Asst. Hort.
C. M. Geraldson, Ph.D., Asst. Horticulturist
Amegda Jack, M.S., Asst. Soils Chemist


FIELD LABORATORIES

Watermelon, Grape, Pasture-LeesLurg
C. C. Helms, Jr., B.S., Asst. Agronomist
L. H. Stover, Assistant in Horticulture

Strawberry-Plant City
A. N. Brooks, Ph.D., Plant Pathologist

Vegetables-Hastings
A. H. Eddins, Ph.D., Plant Path. in Charge
E. N. McCubbin, Ph.D., Horticulturist
T. M. Dohrovsky, Ph.D., Asst. Entomologist

Pecans-Monticello
A. M. Phillips, B.S., Asso. Entomologist
John R. Large, M.S., Asso. Plant Path.

Frost Forecasting-Lake'and
Warren O. Johnson, B.S., Meteorolosist 2

SHead of Department
In cooperation with U. S.
3 Cooperative, other divisions, U. of F.
SOn leave











CONTENTS

PAGE
INTRODUCTION --. ....-. .. ....- ............... .. ..- .-- -- ---- --.------ 5

PURPOSE ..- ..... -......... .......-.... ..------...----.--.--- -- ----. ----. 6

PROCEDURE ... ....... ... ..- ....... ..... ...... .. .....---------- -. ---.-------- 7

DESCRIPTION OF STORES ......................... .......- ..... -- --------- 10

VOLUME OF ORANGES HANDLED ............................----- ------------ 11

CONSUMER RESPONSE TO VARYING PRICE LEVELS .............-........----------- 12

Effect on Total Sales ...... ................. .. ---- ...--- -- .. 12

Sales per 100 Customers .................... .. ..... .- -----.-......- ....- --- --- 14

Characteristics of the Demand for Oranges ................. ...-........... 15

EVALUATION OF RESULTS ...........-..... ------.-.. -- --------- ----- 18

SUM MARY ........--- ----------- ..-.-..- ..---- --------.... ---.. .. -. --------------- 19

A PPENDIX .... ..... ............ ..- ------------------------- 21






ACKNOWLEDGMENTS

The author wishes to express his gratitude to the administrative staff
and store personnel of the Louisville Branch of the Kroger Company for
a vital contribution to the success of this study-their wholehearted co-
operation. He is especially indebted to Messrs. C. G. Schoo, E. J. Albers
and T. M. Todd, who gave unstintingly of their advice, assistance, and
active support, and to Mr. Henry Niemann, Manager of the Louisville
Branch, who, in the face of the many adversities anticipated when the
study was being planned, appreciated the significance of the project and
gave permission for it to be conducted in the stores under his jurisdiction.
The author is indebted also to the following members of the staff of
the Department of Agricultural Economics in the University of Florida
College of Agriculture: Alvin H. Spurlock, Tallmadge E. Bergen, Ernest
E. Brown, and Hooper C. Spurlock for their very excellent assistance
during the field work, and Professor Eric Thor for his valuable suggestions
at various stages in the development of the project.
Much credit is due Dr. W. D. Hanson of the Agronomy Department in
the University of Florida College of Agriculture for his advice during the
planning phases of the study and assistance with the statistical analysis.
To these, and to the many others who contributed active and moral
support to the methodological approach employed, the author is deeply
grateful.











CONTENTS

PAGE
INTRODUCTION --. ....-. .. ....- ............... .. ..- .-- -- ---- --.------ 5

PURPOSE ..- ..... -......... .......-.... ..------...----.--.--- -- ----. ----. 6

PROCEDURE ... ....... ... ..- ....... ..... ...... .. .....---------- -. ---.-------- 7

DESCRIPTION OF STORES ......................... .......- ..... -- --------- 10

VOLUME OF ORANGES HANDLED ............................----- ------------ 11

CONSUMER RESPONSE TO VARYING PRICE LEVELS .............-........----------- 12

Effect on Total Sales ...... ................. .. ---- ...--- -- .. 12

Sales per 100 Customers .................... .. ..... .- -----.-......- ....- --- --- 14

Characteristics of the Demand for Oranges ................. ...-........... 15

EVALUATION OF RESULTS ...........-..... ------.-.. -- --------- ----- 18

SUM MARY ........--- ----------- ..-.-..- ..---- --------.... ---.. .. -. --------------- 19

A PPENDIX .... ..... ............ ..- ------------------------- 21






ACKNOWLEDGMENTS

The author wishes to express his gratitude to the administrative staff
and store personnel of the Louisville Branch of the Kroger Company for
a vital contribution to the success of this study-their wholehearted co-
operation. He is especially indebted to Messrs. C. G. Schoo, E. J. Albers
and T. M. Todd, who gave unstintingly of their advice, assistance, and
active support, and to Mr. Henry Niemann, Manager of the Louisville
Branch, who, in the face of the many adversities anticipated when the
study was being planned, appreciated the significance of the project and
gave permission for it to be conducted in the stores under his jurisdiction.
The author is indebted also to the following members of the staff of
the Department of Agricultural Economics in the University of Florida
College of Agriculture: Alvin H. Spurlock, Tallmadge E. Bergen, Ernest
E. Brown, and Hooper C. Spurlock for their very excellent assistance
during the field work, and Professor Eric Thor for his valuable suggestions
at various stages in the development of the project.
Much credit is due Dr. W. D. Hanson of the Agronomy Department in
the University of Florida College of Agriculture for his advice during the
planning phases of the study and assistance with the statistical analysis.
To these, and to the many others who contributed active and moral
support to the methodological approach employed, the author is deeply
grateful.










Customer Response to Varying Prices for

Florida Oranges

By MARSHALL R. GODWIN

INTRODUCTION

Much has been written and spoken about current and future
problems of the Florida citrus industry. Manifestation of in-
tention on the part of various elements of the industry to
initiate and follow programs designed to improve conditions is
evident from the existing degree of organization. The several
industry groups, through the organizational framework of Flor-
ida Citrus Mutual, have already achieved a high degree of col-
lective action. It is becoming increasingly apparent that the
industry desires and intends to work toward the solution of its
problems.
Generally speaking, there appear to be two objectives which
the industry seeks and considers of paramount importance.
These are: (a) creating stability in the market for citrus fruit
and (b) maintaining a level of prices that will assure a "fair"
return for the producer. Several industry programs have been
undertaken for the purpose of achieving these two goals.
The mechanics of these programs have varied considerably
but a common thread through the fabric of all has been the
notion that, under any given set of economic circumstances, a
reduction in the supply of citrus available for consumption will
result in higher prices per box for that which is sold. This
assumption is based on one of the most fundamental economic
concepts. Its validity cannot be questioned. However, higher
prices per box are by no means synonymous with higher in-
comes for the producer.
The effectiveness of a marketing program designed to regulate
or control the flow of a product into consumption channels de-
pends largely on the nature of consumer responses in terms of
price to the availability of varying quantities. This response is
customarily referred to as the elasticity of demand for the com-
modity.
If consumers tend to resist changes in their consumption
pattern for an item, then the demand for it is considered to be
inelastic. Under such circumstances a reduction in the quantity







Florida Agricultural Experiment Stations


available at any particular time will result in a more than pro-
portionate increase in price. Consequently, the total revenue
will increase as the available supply declines. In like manner,
increasing available supplies of a product which has an inelastic
demand will result in more than proportionate declines in the
price per unit and the total revenue will tend to diminish. The
converse is true for products which have an elastic demand.
It is evident that characteristics of the demand for a com-
modity exert a vital influence on the effectiveness of a marketing
program that involves control of movement into consumption
channels. Consequently, those who are interested in the poten-
tialities of such a program as a device for improving the economic
position of the producer, or for achieving stability in the market,
should consider carefully the available information on the
characteristics of the demand for the commodity in question.

PURPOSE
This study represents the beginning phases of an effort to
determine the nature of the demand for fresh oranges. It is
hoped that the information in this report will assist those who
are charged with the responsibility of developing and carrying
out industry programs which have the objectives of achieving
stability or maintaining a level of prices that will make the
economic position of the Florida citrus producer a tenable one.
The data presented herein are based upon the responses of a few
thousand individuals out of the millions that constitute the
market for fresh oranges. Consequently, the results should be
used with reservation and with full recognition of the hazards
involved in reaching conclusions concerning the characteristics
of the demand for the nation as a whole from the study of such
a small segment.
In designing this study considerable emphasis was placed
upon devising techniques that could be employed on a larger scale
to investigate the national demand for the various citrus pro-
ducts, and to determine the degree of substitution between them.
Consequently, the study had two objectives: (1) to determine
the characteristics of the demand for fresh oranges in a com-
paratively small segment of society and (2) to investigate the
feasibility of using experimental techniques to establish demand
relationships for citrus products. This publication deals pri-
marily with the first objective.







Customer Response to Varying Orange Prices


PROCEDURE
One of the major difficulties involved in determining the nature
of the demand for a particular product is that of obtaining data
under circumstances that can be reconciled with the theoretical
demand concept. The demand schedule is customarily thought
of as the quantities of a given product which consumers are
willing to buy at varying levels of price. Essential elements
of this theoretical concept are that the relationship is limited
to (1) a particular segment of society, (2) a well-defined market
area and (3) a particular moment in time. The impracticality
of obtaining data under circumstances which meet all require-
ments of the theoretical demand concept is obvious. However,
this study was designed with the idea of approaching these re-
quirements more closely than has been possible by the us e of
other research techniques.
The basic procedure followed was one of artificially varying
the price of fresh oranges above and below the established
market level over a comparatively short period. Because o-' the
desire to obtain information on consumer responses to prices
well beyond those customarily encountered in the market, seven
price levels were tested. These were the established market
price and three positive and three negative deviations in inter-
vals of 5 cents per dozen from the established market 'evel.
Thus, the price of oranges was varied over a range of 30 cents
per dozen during the study. Since the stores in which the
pricing experiments were conducted handled 8-pound bags of
oranges as well as the bulk fruit, the price of bagged fruit also
was varied during the study. The price differentials established
for oranges in 8-pound bags represented variations comparable
in magnitude to those established for bulk oranges.1 Conse-
quently, 8-pound bags were sold at the established market price
and at premiums and discounts of 6, 12 and 17 cents from this
price.

SIn determining the dozen equivalent of an 8-pound bag of oranges,
168 oranges having caliper measurements between 3 inches and E 6/16
inches (the minimum and maximum diameter for size 150 Florida oranges)
were picked and separated at random into lots of one-dozen fruit. The
average weight for the 14 one-dozen lots was 112.1 ounces. This was taken
as the weight equivalent of one dozen size 150 fruit. Hence, one-dozen
fruit equals 112.1 or 7.006 pounds. An 8-pound bag, therefore, contained
16
the equivalent of 1.14 dozen of size 150 fruit. The price differential per
bag was obtained by multiplying the differential per dozen by 1.14 and
rounding to the nearest whole cent.







Florida Agricultural Experiment Stations


The response of customers to the seven price levels were
tested in seven large retail stores in central Kentucky. The tests
were conducted over a seven-week period extending from April
28 through June 14, 1952. Prior to carrying out the tests at
the retail level, considerable attention was devoted to planning
the study so that the effect of price could be isolated from the
host of variables encountered in a retail store. For this purpose
a 7 x 7 latin square experimental design was employed (Table
1). In this design, each of the seven price levels was tested
once during each of the seven weeks and, over the entire period,
each price level was tested once in each store. The sequence of
prices over the seven weeks and the order of stores in the first
weekly period were selected by random techniques.

TABLE 1.-DEVIATIONS OF ORANGE PRICES FROM THE ESTABLISHED MARKET
LEVEL DURING EXPERIMENTAL TESTS IN SEVEN RETAIL FOOD STORES,
CENTRAL KENTUCKY, APRIL 28 THROUGH JUNE 14, 1952.

Week Sales Store Number
Beginning Unit I II III I IV | V VI VII
Price Differential-Cents

April 28 Dozen 5 +15 +10 0 -10 + 5 -15
8-lb. Bag -6 +17 +12 0 -12 + 6 -17
May 5 Dozen +15 +10 0 -10 + 5 -15 5
8-lb. Bag +17 +12 0 -12 + 6 -17 6
May 12 Dozen +10 0 -10 + 5 -15 5 +15
8-lb. Bag +12 0 -12 + 6 -17 6 +17
May 19 Dozen 0 -10 + 5 -15 5 +15 +10
8-lb. Bag 0 -12 + 6 -17 6 +17 +12
May 26 Dozen -10 + 5 15 5 +15 +10 0
8-lb. Bag -12 + 6 -17 6 +17 +12 0
June 2 Dozen + 5 -15 5 +15 +10 0 -10
8-lb. Bag + 6 -17 6 +17 +12 0 -12
June 9 Dozen -15 5 +15 +10 0 -10 + 5
8-lb. Bag --17 6 +17 +12 0 -12 + 6


Conducting the experiments in this manner made it possible
to isolate the effect of price from two other prime sources of
variation in purchase rates-the inherent differences in customer
purchase patterns among stores and seasonal changes in pur-
chase rates.
In addition to the manipulation of prices in accordance with







Customer Response to Varying Orange Prices


the plan outlined above, considerable control was exercised over
retailing operations in the seven stores, especially as they per-
tained to oranges. First, it was necessary to maintain a reason-
ably constant level of quality during the entire period covered
by the study. Any fruit showing signs of deterioration was
removed from display and disposed of through other outlets
sufficiently well removed from the test stores to prevent any
possible effects on the pricing experiments. In this manner it
was possible to keep the quality of fruit comparable from week
to week. Second, it was necessary to control the size of display
in each store. All of the stores were visited several times
prior to beginning the study and an idea was gained of the
quantity of fresh oranges normally displayed. While the pric-
ing tests were in progress displays were not allowed to fall below
that considered normal for each store. Thus, in addition to an
experimental design which permitted the elimination of the
effects of store differences and seasonal variation on purchase
rates, conditions in the retail stores were controlled to minimize
the variation in purchase rates because of quality differences
or size of display.
All stores involved in the pricing experiments were units of a
large national chain. Consequently, there was very little varia-
tion in pricing practices, display methods or managerial policies
among them. With some minor exceptions prices of items of
comparable quality (except fresh oranges) were the same in all
stores. The only deviation from the standard operating policies
of the organization, and the single variable introduced in this
study, was that of varying prices among stores for fresh oranges.
When the study was initiated the prevailing price of oranges
in approximately 75 stores (including the seven employed in
the study) under the jurisdiction of an administrative sub-
division of this chain was 39 cents per dozen and 49 cents per
8-pound bag.
These prices were used as the base from which the retail
price was varied for the entire seven-week period. In stores
other than those employed in the study, a retail price of 49
cents for the 8-pound bag and 39 cents per dozen was main-
tained for a period of five weeks. During the last two weeks
the price per dozen in all units except the test stores was 45
cents. Inability to acquire supplies of fruit in 8-pound bags
comparable in quality to that handled during the initial weeks
of the study led to the discontinuance of sales in this form eight







Florida Agricultural Experiment Stations


sales days before the study was completed. This action was in
conformance with the customary practice of the cooperating
organization to discontinue handling 8-pound bags during the
summer months.

DESCRIPTION OF STORES
The retail units employed in this study would all meet the
qualifications customarily found in a definition of a super-
market.2 Each store had three distinct departments-grocery,
meat and produce. All had a central check-out system and
entirely self-service grocery departments. The meat depart-
ments of two stores were also self-service.
Four of the stores were located in a metropolitan area of
approximately 100,000 persons. Two were located in cities with
populations of 10,000 and one in a town with a population of
2,500. Since none of the stores catered to a particular segment
of the population or a particular economic stratum, this study
represents the responses of individuals over a rather wide range
of economic and social circumstances.
All of the stores would be considered large by most standards.
Sales of produce per store averaged about $2,500 per week for
the period covered by the study. The weekly produce sales
volume per store ranged from a high of $2,725.45 to a low of
$2,149.37 (Table 2).

TABLE 2.-WEEKLY PRODUCE SALES IN SEVEN RETAIL FOOD STORES,
CENTRAL KENTUCKY, APRIL 28 THROUGH JUNE 17, 1952.
Average Produce Sales
Week Beginning per Store
April 28 .......... ..... .... -... ....... .. ........... $2,725.45
M ay 5 ......................- ........ ......... ...------2,554.63
May 12 ...........~.... ---. ----------..- ----. ----..- 2,609.30
May 19 ....-....... ..... ......... ........ .............. 2,381.58
May 26 ---------.....---......... ----------- --. 2,149.37
June 2 ............... ........ ................ ........... .. 2,616.92
June 9 ........... ..... .......- ....-...- ......... 2,736.77

2A generally accepted definition of a Super Market is that adopted by
the Super Market Institute: "A complete, departmentalized food store with
at least the grocery department fully self-service and with a minimum sales
volume of $500,000 per year." "The Super Market Industry Speaks". The
Super Market Institute, Chicago, Illinois, 1951.








Customer Response to Varying Orange Prices


Volume of traffic, or number of customers served, provides an
additional indication of the size of the retail stores in which this
study was conducted.3 Total number of sales per week in all
stores ranged from 42,144 during the third week of the study to
37,077 during the fifth week (Table 3). For the entire period
the stores handled an average of 39,112 customers per week, or
5,587 per store.

TABLE 3.-TOTAL NUMBER OF SALES MADE WEEKLY AND THE AVERAGE
NUMBER PER STORE, SEVEN RETAIL FOOD STORES, CENTRAL KENTUCKY,
APRIL 28 THROUGH JUNE 14, 1952.
Total Number Number of Sales
Week Beginning of Sales per Store

April 28 ..-....-. ...... ........ 39,385 5,626
May 5 ... .................. ........... 38,866 5,552
M ay 12 ............- -.......... .............. 42,144 6,021
M ay 19 ..................... .......... ..--- ..- 39,438 5,634
May 26 ........-.......... ........- .....- 37,077 5,297
June 2 ........ ....................... ... .... 38,593 5,513
June 9 ....................------. -- .---- 38,270 5,467

Average .... ........................... ....... 39,112 5,587


In view of the fact that customers may and frequently do visit
a retail store several times during the week, the volume of
traffic handled per store provides only a general indication of
the number of different customers whom these stores served.
However, the number of sales indicates with considerable ac-
curacy the number of sales opportunities that existed for fresh
oranges during each week of the study.

VOLUME OF ORANGES HANDLED

Oranges were handled in considerable volume by the seven
stores participating in this study. Total sales in all units over
the seven-week period amounted to 172,155 pounds (Figure 1).
This volume is the equivalent of slightly more than 2,000

3 The number of customers that each store served during the week was
obtained by the net count from all cash registers each day. Such counts
indicate the number of times that the registers were operated to record
the sale of merchandise to a customer.







Florida Agricultural Experiment Stations


packed boxes of fruit. The quantity sold through all stores
varied considerably from week to week. Sales ranged from
31,764 pounds, or the equivalent of 374 boxes, during the fourth
week of the study to 16,529 pounds, or the equivalent of 194
boxes, during the seventh week. Sales in all stores averaged
24,594 pounds per week. Weekly sales per store averaged 3,513
pounds, or the equivalent of 41.3 packed boxes of fruit.
THOUSAND
POUNDS





3- ACTUAL SALES

TREND IN SALESi
20



10



APRIL 28 MAY 5 MAY 12 MAY 19 MAY 26 JUNE 2 JUNE 9
WEEK BEGINNING
Fig. 1.-Weekly sales of oranges in seven retail food stores, Central
Kentucky, April 28 through June 14, 1952.

It is evident from Figure 1 that the volume of fruit sold by all
stores declined as the season progressed. While an exception
to the consistent decline occurred during the fourth week, the
total volume of sales in all stores declined at an average rate of
9.2 percent per week during the period studied. The average
weekly decline in volume for all units was 2,261 pounds, or 323
pounds per store.

CONSUMER RESPONSE TO VARYING PRICE LEVELS

Effect on Total Sales.-An important aspect of varying the
price for fresh oranges is the effect of the several price levels
on the total volume sold. Volume is an important consideration
of the retailer. This is especially true for the numerous items
found in the produce department of a super market. The size







Customer Response to Varying Orange Prices


of display and location within the produce department, as well
as amount of time and effort the retailer is willing to devote to
promotional activities, are largely dependent upon the relative
importance of an item in terms of tonnage and as a source of
revenue.

THOUSAND
POUNDS


-15 -10 -5 0 +5 +10 +15
PRICE DIFFERENTIAL IN CENTS
Fig. 2.-Total sales of oranges in seven retail food stores at varying
premiums and discounts from the established market prices, Central Ken-
tucky, April 28 through June 14, 1952.

As successively higher prices were charged for fresh oranges
there was a pronounced tendency for the volume of sales to de-
cline. During those weeks in which oranges were sold at a
discount of 15 cents per dozen equivalent below the established
market level the quantity sold in all stores amounted to 43,911
pounds (Figure 2). At a discount of 10 cents the total sales
were 31,043 pounds. At the normal market price of 39 cents
per dozen and 49 cents per 8-pound bag total sales amounted to
24,173 pounds. When the price was maintained 10 cents per
dozen above the established market, the total volume of sales
was 16,888 pounds while, at a premium of 15 cents, sales in all
stores declined to 13,350 pounds. At a premium of 15 cents







Florida Agricultural Experiment Stations


per dozen equivalent above the established market level, total
sales in all stores were only 55 percent of the volume sold at the
regular market price. At a discount of 15 cents sales in all
stores were 82 percent higher than the volume sold at the normal
market level.
Sales per 100 Customers.-In view of the fact that the seven
retail stores varied with respect to total volume of business and
the number of customers served per week, the total sales of
oranges are only generally indicative of the response of individ-
ual customers to the various price levels. In order to broaden
the application of the findings, sales in each store were reduced
to a per-customer basis. This was accomplished by dividing the
total sales of oranges in each store by the total number of
customers which the store served during the week. Expressed
in this manner, the results obtained became more meaningful.
They indicate the effect of the various prices on the sales of
oranges per sales opportunity at the retail level.
PURCHASES PER
100 CUSTOMERS
(POUNDS)
120

100 *

80 -

60 -




20 -
0

-15 -10 -5 o +5 +10 +15
PRICE DIFFERENTIAL IN CENTS
Fig. 3.-Purchases of oranges per 100 persons at varying premiums
and discounts from the established market price, seven retail food stores,
Central Kentucky, April 28 through June 14, 1962.

The purchase rate of oranges per 100 customers increased as
successively lower prices were charged and decreased as suc-
cessively higher premiums were introduced. With the excep-







Customer Response to Varying Orange Prices


tion of those weeks in which oranges were sold for 5 cents per
dozen equivalent below the established market price this re-
lationship was consistent. When oranges were offered to
customers at prices representing a discount from the normal
market level of 10 cents per dozen, sales per 100 customers (or
sales opportunities) were 78.3 pounds (Figure 3). At a discount
of 15 cents per dozen equivalent the purchase rate rose to 108.4
pounds. The quantity of oranges purchased at a discount of 10
cents per dozen equivalent was 33 percent more than the volume
purchased at the prevailing market price. At a discount of 15
cents per dozen the purchase rate per 100 customers was 85
percent higher than when the normal market price prevailed.
Orange sales per 100 customers at 5 cents per dozen above
the market amounted to 50.0 pounds. .During weeks in which
a 10-cent premium was charged the sales rate declined to 44.2
pounds. At a price of 15 cents per dozen equivalent above the
established market level purchases per 100 customers declined
further to 34.6 pounds.
In relation to volume of oranges sold at the established mar-
ket level, sales at premiums of 5 and 10 cents were accompanied
by a reduction in the quantity purchased per 100 customers of
14.5 and 24.4 percent, respectively. At a premium of 15 cents the
volume purchased per 100 customers was 41 percent less than
the quantity sold during weeks in which the normal market
price prevailed.
Characteristics of the Demand for Oranges.-The preceding
sections of this report have dealt with the absolute responses
of consumers to the various levels of price for fresh oranges.
In order that the results may be applied to the marketing prob-
lems confronting the Florida citrus industry, it is necessary to
establish a general relationship between the price at which
oranges were sold and the quantities which customers pur-
chased.
The initial step in establishing such a relationship was to test
for the significance of price as a factor influencing the rate at
which purchases were made. The statistical procedure em-
ployed was analysis of variance.4 When the sales of oranges in
each store and at each level of price were expressed in terms of
purchases per 100 customers, statistical tests indicated that the
price charged per dozen equivalent had a highly significant
SA more comprehensive discussion of the statistical procedure involved
is included in the Appendix.







Florida Agricultural Experiment Stations


effect on the purchase rate.5 Since price had a significant effect
on the volume of oranges purchased, there was justification for
establishing a general relationship between the various price
levels tested in the study and the response of customers to these
prices in terms of purchase rates. From the analysis in Ap-
pendix Table 2, it is evident that a parabolic curve best describes
the response of the customers in these stores to the various
price levels.6
The relation of quantity of oranges purchased to price charged
per dozen equivalent is shown in Figure 4. This relationship is
based on average sales per 100 customers in each store at each
of the seven levels of price. The curve represents the average
response of the customers of all stores at each price level. It
is considered as descriptive of the demand of these customers
during the period covered by this study.
The demand for oranges over the entire range of price circum-
stances with which customers were confronted was, as a general
rule, slightly elastic. The coefficient of elasticity for the curve
as a whole was 1.160.7 Thus, successive price declines were ac-
companied by an increase in total revenue (price times quantity)
derived from the sale of oranges at the retail level. As succes-
sively lower prices prevailed in each store, purchases per cus-
tomer tended to increase at a rate slightly higher than the rate
at which the price declined. Conversely, successively higher
prices brought about more than proportionate declines in sales
rates, and the total revenue diminished as the price increased.
There were significant differences in the nature of the demand
for fresh oranges at the various levels of price. The highest
degree of elasticity, and consequently the most response in terms

6 In testing for the significance of the effect of price on the purchases
per 100 customers, the following variance ratio was obtained: F = 22.65.
The F value for 6 and 30 degrees of freedom at the 1 percent level is 3.47.
SThe curve of the relationship is described by the general formula:
Y = aX + bX2 + C. Calculated values for the various components yielded
the following equation: Y = -2.114X + .0764X2 + 54.098. When this
curve was fitted to the mean rate of purchase at each level of price, the
correlation coefficient (r) obtained was .969.
SThe coefficient of elasticity was calculated from the following general
formula
Qo Qi
Q. + Q1
n =
Po P,
P,+P1
P. + Pi
where QoPo is one set of prices and quantities and Q1P1 is another set of
prices and quantities.




KIL-t UIri-tKtINIIAL rtK
DOZEN EQUIVALENT
(CENTS)


Fig. 4.-Relation


.A





C4




,D



IE







00

40 50 60 70 80 90 100 110

POUNDS PURCHASED PER 100 CUSTOMERS
of price charged for Florida oranges to the purchase rate per 100 customers, seven retail
food stores, Central Kentucky, April 28 through June 14, 1952.







Florida Agricultural Experiment Stations


of purchases to a price change, was found in the arc of the
demand curve between points C and D, and centering on the
established market price. The coefficient of elasticity for this
range of prices was 1.516. Elasticity of an almost equal degree
existed at prices slightly below the established market level.
For the range of prices between points DE the coefficient of
elasticity was 1.467. The response of customers continued to be
elastic at prices below point E, but the degree of elasticity
tended to diminish as lower prices were charged. Between points
E-F a 1 percent change in the price of oranges was accompanied
by a 1.273 percent change in the quantity purchased per 100
customers. Between point F and the lower limits of the curve
indicated by F', the elasticity diminished further. The coefficient
of elasticity was 1.093, or only slightly higher than unity.
At prices above the market level the degree of elasticity de-
creased and eventually became less than unity. The elasticity
between points B-C (an arc centered on the quantity purchased
when the price differential was +5) was 1.301. This is about
the same degree of elasticity as found between points E-F, which
represents customer responses when the price was maintained
at a discount of 10 cents below the market level. At prices
above point B the demand for fresh oranges became inelastic.
Average elasticity between points A-B was .700, indicating that
a 1 percent change in price of fruit would be accompanied by a
change of .7 percent in quantity purchased. Consequently,
availability of successively smaller quantities of fruit within
this range of prices would result in an increase in total revenue.
Evidently some individuals consider fresh oranges essential in
the family diet, or most persons feel that a limited quantity of
this fruit is essential.

EVALUATION OF RESULTS

Results of this study indicate that, with the exception of
circumstances resulting in the availability of a very limited
quantity of fresh oranges, the maximum revenue for a given
quantity is obtained at the retail level by marketing the entire
supply. For all except the highest price levels tested, the indi-
viduals patronizing the seven retail stores in which this study
was conducted responded to successively lower prices by in-
creasing their purchases of fresh oranges by an amount larger
than the extent of the price reduction. Since revenue is a func-







Customer Response to Varying Orange Prices


tion of price times the volume of sales, such a response resulted
in an increase in total revenue as oranges were sold at succes-
sively lower prices. Under such circumstances it is evident that
the maximum revenue for a given quantity of fresh fruit would
have been obtained by marketing the entire amount. Since the
response of customers was elastic over a wide range of prices,
this would be true for an equally wide range of quantities.
Largest responses in terms of increased purchase rates
(and in terms of increased revenue) to relative price changes
were obtained at prices slightly below the established market
level. At prices substantially below the established market,
purchases continued to increase at a rate faster than the rate
of price decline. However, response of customers in terms of
increased purchases diminished as successively lower prices were
introduced, and became almost equal to the rate of price change
(an elasticity of unity) when oranges were sold at a price
15 cents per dozen equivalent below the established market
level. A percentage change in price at extremely low levels
influenced the purchase rate per 100 customers less than a change
of equal magnitude at levels nearer the prevailing market price.
Consequently, the extent to which prices would decline as a re-
sult of a given absolute increase in volume would depend upon
the total quantity which customers must be induced to consume.
The percentage price reduction necessary to induce the patrons
of the stores included in this study to increase their weekly
purchase rate from 50 to 60 pounds per 100 customers would
have been somewhat less than that required to induce them to
increase their consumption from 75 to 85 pounds.

SUMMARY

This study represents the beginning phases of an effort to
determine the nature of the demand for Florida citrus products.
The basic procedure followed was one of artificially varying the
price of oranges above and below the established market level
over a comparatively short period of time. The customers of
seven retail food stores in Central Kentucky were subjected to
seven levels of prices for fresh oranges over a period of seven
weeks extending from April 28 through June 14, 1952. The
seven price levels tested were: the established market price, and
three positive and three negative deviations of 5 cents per dozen
equivalent from the established market level.







Florida Agricultural Experiment Stations


All of the stores involved in the study would be considered
super markets and all would be considered large by most stand-
ards. The weekly sales of produce per store averaged about
$2,500 and an average of 5,587 customers was handled per store
per week.
Total sales of oranges in all stores over the seven-week period
covered by the study amounted to 172,155 pounds, or the equiva-
lent of slightly more than 2,000 packed boxes. Sales per week
in the seven stores ranged from 16,529 to 31,764 pounds. Weekly
sales per store averaged 3,513 pounds, or the equivalent of 41.3
packed boxes. As the season progressed the total volume of
oranges sold in all stores declined at an average rate of 9.2 per-
cent per week.
As successively higher prices were charged for fresh oranges
there was a pronounced tendency for the total volume sold in
all stores to decline. When oranges were sold at 15 cents per
dozen equivalent below the established market level the total
sales in the seven stores amounted to 43,911 pounds. With the
exception of those weeks in which the fruit was sold at the pre-
vailing market price, the total volume of sales consistently de-
clined as higher prices were charged. At a premium of 15 cents
above the established market level the total weekly sales in the
seven stores was 13,350 pounds.
A similar relationship was found to exist when orange sales
were expressed in terms of purchases per 100 customers. At a
discount of 15 cents per dozen equivalent from the market price,
sales per 100 customers were 108.4 pounds. At a price 15 cents
above the market, sales per 100 customers amounted to only
34.6 pounds. Statistical tests indicated that the price charged
per dozen equivalent had a highly significant effect on the rate
at which customers purchased fresh oranges.
The demand for oranges among the customers patronizing
the seven stores involved in this study was, in general, elastic.
The coefficient of elasticity for the entire range of prices tested
was 1.160. However, the degree of elasticity varied considerably
over the range of prices tested. Greatest elasticity was found
at prices near the established market level. As successively
larger premiums and discounts were introduced the elasticity of
the demand diminished. At a price discount of 15 cents per
dozen equivalent an elasticity approximating unity was obtained.
At prices of 10 and 15 cents per dozen above the established
market level the demand became inelastic.







Customer Response to Varying Orange Prices


APPENDIX

EXPLANATION OF STATISTICAL PROCEDURE
Testing for the Significance of Price, Stores and Weeks.-
Analysis of variance is a statistical procedure for ascertaining
the proportion of the total variation existent in an experimental
design that can be attributed to the various components, and a
means of evaluating the significance of the variation associated
with the various components. The 7 x 7 latin square employed
in this study contained four sources to which the variation in
the rate of orange purchases per 100 customers may be ascribed.
These were: (1) differences among the seven retail stores em-
ployed in the pricing experiments, (2) changes in the buying
practices associated with time (during the seven-week period
covered by the study), (3) variation in purchases due to the
seven levels of price tested, and (4) variation attributable to
experimental error. The significance of the variation for the
first three of the above components is determined by the ratio
of the mean square of each to the mean square of the fourth
(i.e., the mean square of error). This test is commonly known
as the "F" test, or variance ratio, and is based on probability
theory. In order for the effect of price, stores or weeks on
purchase rates per 100 customers to be considered significant,
the ratio of the mean square of each to the mean square for error
must exceed established confidence limits for the degrees of
freedom associated with the sum of squares for error and with
each of the other three components.1 The degrees of freedom
associated with each of the four components of the experimental
design, the sum of squares for each, their respective mean
squares, and the variance ratio are given in Section A of Table 2.
Determining the Nature of the Relationship Between Price
and Purchase Rate per 100 Customers.-The six degrees of free-
dom associated with price were subdivided to evaluate the linear
and curvilinear response of customers to the various price levels.
The orthogonal forms for the linear and quadratic components
of the seven price treatments are given in Table 3.2

STables of "F" values for various degrees of freedom and levels of
significance may be found in "Statistical Tables for Biological, Agricul-
tural, and Medical Research" by R. A. Fisher and F. Yates, Oliver and
Boyd, London, England, 1938.
SThe procedure employed in fitting an orthogonal polynomial was that
outlined by G. W. Snedecor in "Statistical Methods," Iowa State College
Press, 1950, pp. 409-411.










APPENDIX TABLE 1.-WEEKLY PURCHASES OF ORANGES PER 100 CUSTOMERS AT VARYING PREMIUMS AND DISCOUNTS FROM
THE ESTABLISHED MARKET PRICE, SEVEN RETAIL FOOD STORES, CENTRAL KENTUCKY, APRIL 28 THROUGH JUNE 14, 1952.*
Price Differential
per Dozen Week Beginning Total Mean
Equivalent An-il 28 Mav 5 May 12 May 19 IvMay 26 June 2 June 9
Pounds

IV VII I V VI III II
-15 123.11 74.16 87.96 188.17 125.15 65.27 95.24 759.06 108.44
I V VI III II IV VII
-10 99.43 119.13 109.95 61.22 62.74 70.05 25.93 548.35 78.34
II IV VII I V VI III
5 53.68 63.84 39.49 60.62 76.72 61.08 41.36 396.79 56.68
V VI III II IV VII I
0 102.10 104.57 56.72 48.03 44.15 26.66 27.46 409.69 58.53
VII I V VI III II IV
+ 5 37.34 59.93 67.68 82.22 41.36 38.67 22.79 349.99 50.00
VI III II IV VII II V
+10 83.22 41.74 39.88 36.76 27.07 38.51 42.27 309.45 44.21
III II IV VII I V VI
+15 39.34 35 29 30.49 24.08 38.88 39.29 34.95 242.32 34.62

Total 538.22 I 498.66 432.07 501.10 416.07 339.53 290.00 3,015.65 430.81
I

Mean 76.89 71.24 61.72 71.59 59.44 48.50 41.43 430.81 61.54

Store numbers for each week and each price are indicated by Roman numerals.




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