Log out Go to App
Go to App

Learning Materials

Features

Discover

Chapter 29: Problem 12

A clothing store on fashionable Rodeo Drive charges more for the same clothes than another store in less fashionable Compton. Why does the first store charge more? (LO3) a) They have to pay a higher rent. b) They know their customers can afford to pay more. c) They advertise more. d) Because they can.

Short Answer

Expert verified
The short answer is: b) They know their customers can afford to pay more.

Step by step solution

01

Analyzing option a) "They have to pay a higher rent."

The store on Rodeo Drive might have to pay a higher rent due to its location in a more fashionable and upscale area. The rent for commercial spaces in such areas is usually higher compared to less fashionable areas. This could be a contributing factor in why the prices are higher in the Rodeo Drive store.
02

Analyzing option b) "They know their customers can afford to pay more."

Given that Rodeo Drive is a fashionable area, it is likely that the customers shopping there have a higher disposable income and can afford to pay more for clothes. The store can charge higher prices because their customers are willing and able to spend more. This might be a reason for the higher prices at the Rodeo Drive store.
03

Analyzing option c) "They advertise more."

Advertising could be a factor that affects the prices of clothes at the Rodeo Drive store. If the store spends more on advertising, they may pass those costs onto their customers by charging higher prices. However, this option doesn't necessarily explain why the prices are higher compared to the store in Compton.
04

Analyzing option d) "Because they can."

This option might seem vague but indicates that the store charges higher prices simply because they can do so and still maintain their customer base. This could be due to the fashionable location, the willingness of customers to pay more, and their reputation in the area. #Conclusion# After analyzing all the options, option b) "They know their customers can afford to pay more" seems to be the most relevant reason for the Rodeo Drive store to charge more for the same clothes. While the other factors mentioned in options a), c), and d) may contribute to higher prices, the main driving factor is that the store knows that its customers can afford to pay more and are willing to do so.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

The practice of usury (LO8) a) is illegal in the United States b) is legal in some states and illegal in others c) is legal only if borrowers are in the military service d) was approved of by most major religions until just a few centuries ago

Which economist believes all profits are linked with uncertainty and risk? (LO6, 7) a) Frank Knight c) Karl Marx b) Joseph Schumpeter d) John Maynard Keynes

Which of the following is the most accurate statement about payday lenders? (LO8) a) Virtually all of them operate illegally. b) Payday lending operations prey primarily on military service members and their families. c) They charge extremely high interest rates. d) They are very useful to low-income families, because they force the families to save.

Which statement is true? (LO2) a) Only the owners of labor can earn an economic rent. b) Only the owners of land can earn an economic rent. c) Both the owners of land and labor can earn an economic rent. d) Neither the owners of land nor the owners of labor can earn an economic rent.

Which statement is true? (LOl) a) All land has the same economic value. b) The most important factor affecting rent is location. c) The economic value of a plot of land is determined exclusively by the raw materials it contains. d) None of these statements is true.
See all solutions

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free