A common marketing tactic among many liquor stores is to offer their clientele quantity (or volume) discounts. For instance, the second-leading brand of wine exported from Chile sells in the United States for $15 per bottle if the consumer purchases up to eight bottles. The price of each additional bottle beyond this is only $8. (a) If a consumer has $200 to divide between purchasing this brand of wine and other goods, graph the consumer’s budge set when liquor stores use this marketing tactic and the price of other goods is $1.00. (b) Assuming a consumer has standard indifference curves, will a consumer ever purchase exactly eight bottles of this wine?

A common marketing tactic among many liquor stores is to offer their clientele quantity (or volume) discounts. For instance, the second-leading brand of wine exported from Chile sells in the United States for $15 per bottle if the consumer purchases up to eight bottles. The price of each additional bottle beyond this is only $8. (a) If a consumer has $200 to divide between purchasing this brand of wine and other goods, graph the consumer’s budge set when liquor stores use this marketing tactic and the price of other goods is $1.00. (b) Assuming a consumer has standard indifference curves, will a consumer ever purchase exactly eight bottles of this wine?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter6: Demand Relationships Among Goods

Section: Chapter Questions

Problem 6.8P

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