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 the watch category frequently uses prestige pricing, wherein lower prices may result in lower sales.

Question

Quizplus · Accepted Answer

The likely cause of the increase in sales volume is because the watch category frequently uses prestige pricing, wherein lower prices may result in lower sales. TAG Heuer's increase in price from $250 to $1,000 signaled a higher level of prestige, which could have led to increased demand for the brand.

When the Swiss Watchmaker TAG Heuer Raised the Average Price