By selling products in both retail stores and outlet stores, firms can increase their profits by charging ________ prices to consumers with a low price elasticity of demand and ________ prices to consumers with a higher price elasticity of demand.
A)higher; higher
B)higher; lower
C)lower; higher
D)lower; lower

Question

Quizplus · Accepted Answer

By selling products in both retail stores and outlet stores, firms can charge higher prices to consumers with a low price elasticity of demand who are willing to pay more for convenience and immediate availability of the products. On the other hand, outlet stores can offer lower prices to consumers with a higher price elasticity of demand who are more price-sensitive and willing to travel to farther locations for discounted products. Thus, selling products in both types of stores can increase profits by catering to different segments of consumers.

By Selling Products in Both Retail Stores and Outlet Stores