When the Swiss Watchmaker TAG Heuer Raised the Average Price

question 318

Multiple Choice

When the Swiss watchmaker TAG Heuer raised the average price of its watches from $250 to $1,000, its sales volume jumped sevenfold. The likely cause of this volume increase is

• A)because the watch market is highly conservative.
• B)because economies of scale in production would be substantial.
• C)because retailers are not willing to carry new brands of watches in this category.
• D)because once the initial price is set, it is nearly impossible to lower the price without alienating early buyers.
• E)because watches in this category have an element of prestige pricing, so that lower prices may result in lower sales.

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