Multiple choice

Directions: For this question, select the best of the answer choices given.

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?

  1. The retail wine market is characterized by an extremely wide range of competing products.

  2. Many consumers make decisions about which wines to purchase on the basis of reviews of wine published in books and periodicals.

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

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

  5. Consumers who purchase wine regularly generally have strong opinions about which wines they prefer.
Reveal answer Fill a bubble to check yourself
C Correct answer
Explanation

The anomaly occurs because wine consumers use price as a signal of quality. When prices increase without any improvement in the wine itself, consumers interpret the higher price as indicating better quality and purchase more. This is different from most products where consumers assume higher price means less value for money.

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