Maria Is a Sales Manager of an Appliance Store and She

question 19

Essay

Maria is a sales manager of an appliance store and she sometimes visit outlets run by competing stores. Six months ago, she noticed that rivals' prices were very close to the prices at her store. However, in the last six months, her competitors have lowered their prices to about 15 percent below the prices at her store. Nevertheless, the total unit sales at her store have increased slightly during this time period. Assuming rational buyers and no deceptive advertising, what is the rational explanation for this?

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Definitions:

Luxury Good

A product or service that is not necessary for survival but is considered highly desirable within a culture or society, often associated with wealth or high social status.

Price Elastic

Price elastic describes how the quantity demanded of a good or service changes in response to a change in its price.

Income Portion

The part of an individual's or household's income that is allocated for various types of spending or saving.

Close Substitutes

Goods or services that can easily replace each other in consumption due to their similar characteristics.