A machine tool company estimates the market potential for its wood lathe by identifying all potential buyers of wood lathes in the area and estimating the number of lathes each one might buy. Which method is the company using to estimate market potential?

A. Market-buildup method
B. Chain-ratio method
C. Sales quota method
D. Product-penetration percentage
E. Multiple-factor index method

The company is using the market-buildup method to estimate market potential, which calculates total possible sales by identifying potential buyers and estimating the number of units each might buy.

Explanation:

A machine tool company that estimates the market potential for its wood lathe by identifying all potential buyers of wood lathes in the area and estimating the number of lathes each one might buy, is using the market-buildup method to estimate market potential.

This method involves assessing the possible demand for products based on the number of potential customers and their purchasing capacity. This is done by building a market profile of potential buyers, then calculating the total possible sales amount by multiplying the number of potential buyers by the number of units each one might purchase.

This method is particularly useful when the number of potential buyers is known, and it's possible to make a reliable estimate of the number of products they might buy.

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