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Unusual Price of Wine

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Unusual Price of Wine

by fighting_cax » Sat Nov 15, 2008 12:13 am
Normally, increases in the price of a product decrease its sales except when the price increase accompanies an improvement in the product. Wine is unusual, however. Often increases in the price of a particular producer's wine will result in increased sales, even when the wine itself is unchanged.
Which of the following, if true, does most to explain the anomaly described above?
(A) The retail wine market is characterized by an extremely wide range of competing products.
(B) Many consumers make decisions about which wines to purchase on the basis of reviews of wine published in books and periodicals.
(C) Consumers selecting wine in a store often use the price charged as their main guide to the wine's quality.
(D) Wine retailers and producers can generally increase the sales of a particular wine temporarily by introducing a price discount.
(E) Consumers who purchase wine regularly generally have strong opinions about which wines they prefer.

OA: C

Please explain answer.
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by raunekk » Sat Nov 15, 2008 12:28 am
imo:C

Wine is unusual, however. Often increases in the price of a particular producer's wine will result in increased sales, even when the wine itself is unchanged.


this says why consumers purchase expensive wines...
because they correlate that

higher the price=>>>better the quality of wine

i hope this helps..

if any doubt do let me know..
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by fighting_cax » Sat Nov 15, 2008 12:37 am
Thanks Raunekk.

While I understand the corellation between consumers perception that higher price = better quality, I get lost in the same logic. If higher price = better quality, and better quality = increased sales, then shouldn't all wine brands be priced higher? Or more extremely, shouldn't all wines be priced at the highest possible price?

Applying that logic seems to make choice D more reasonable -- because of a discount, wines can enjoy higher sales.

Hope you can address this confusion.
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by raunekk » Sat Nov 15, 2008 2:05 am
Firstly this is a "resolve the paradox" type question.
So we need ot find out an answer choice that removes the discrepancy in the argument.

P1: increse price=>> decrease in sales
increase price + increase quaity =>> increase in sales.

P2: for wine,
increase price=>>increase in sales.

Now take,
We need to fill the gap as to why for wine,

increase price=>>increase in sales.

1st take D,

Wine retailers and producers can generally increase the sales of a particular wine temporarily by introducing a price discount

i.e(Wine retailers and producers) discount =>> increase in the sales.

Lets try to put it back in the question.

P1: increse price=>> decrease in sales
increase price + increase quaity =>> increase in sales.

D:Wine retailers and producers discount =>>increase in sales.

P2: for wine,
increase price=>>increase in sales

Does it help to answer the question :
Why for wine,
increase price=>> increase in sales.
and gerenally ,
increase price=>> decrease in sales.???

No.

Lets take C

Consumers selecting wine in a store often use the price charged as their main guide to the wine's quality.

consumers might think,

higher the price=>>higher quality wine

which leads to==>>> increase in sales


This helps to answer ,
why for wine,
increase price=>> increase in sales


i hope this helps..
thanks.
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by Karen » Sat Nov 15, 2008 4:08 am
fighting_cax, you're making a mistake that's common for people just getting started -- you're thinking too far outside the scope of the problem. You're trying to think the problem through even further than it goes, carrying the logic on into the real world and adding more speculation -- "But if this were true, shouldn't all wines be priced as high as possible? But there are still inexpensive wines out there, so this can't be right..."

What you want to do is just find the little missing link that resolves the logical paradox, and then stop. If consumers think more expensive wine is higher quality, they'll buy it, and that's all you need. When you keep speculating about how this would lead to negative or bizarre consequences, you're going too far -- that's not part of the question. By the time you add in the idea that wines will sell better if there's a discount, you're actually going against the set-up of the problem -- the problem talked about price increases, not discounts.

Knowing when to stop speculating will get a lot easier with practice. One way I like to explain it is, it's like you're solving a jigsaw puzzle and you just have to snap in one little piece. You're not being asked to expand the puzzle, invent new pieces, or design a whole new puzzle. You just have to find one little piece that fits into one slot, and then move on to the next question.
Karen van Hoek, PhD
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by fighting_cax » Mon Nov 17, 2008 3:52 am
Thanks Raunekk and Karen. Appreciate your help.
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by vanessa.m » Fri May 13, 2016 1:58 am
I am leaning more towards C, but I'm not sure about it.
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by nicolette » Fri May 13, 2016 2:08 am
My intuition whispers that it is C
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