Question.2282 - Instructions Identify a time when you saw a price that was “too good to be true.” Using the economic theory you learned in this unit, justify why the firm set the price below its average total cost of production. Your journal entry must be at least 200 words in length. No references or citations are necessary.
Answer Below:
Last year I happened to come across a sale in a supermarket where the meat was set at a price that was too good to be true. They were offering noodles at $5 per packet, which are usually priced at $25. The price offered were very low, and it was evident from the sale that it was a sale done to make way for the new products waiting to be put up in the shelves for the upcoming holidays season. The price set were way below the average variable cost of the product. A possible reason for the seller selling the noodles at such cheap price were that the noodles were from old lot, and they were making some space for the new lot products to be put up in the shelves for the holiday season. Since the holidays season are always high in demand, the seller wanted to finish the older lots so that the fresh batches could be offered on sell. Furthermore, noodles are eatables which has a shelf life and if they were not sold soon, they would perish and would not be suitable for sell. Hence, the seller was selling it at throw away prices so that they come fetch some cost from the sale which otherwise would have be thrown away anyhow.More Articles From Economics
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