Question

Margaret has been invited to a fancy dinner party and wants to bring a good bottle of wine as a gift for the host. Since she does not know much about wine, she will likely use the price of the wines as:____________.
a. an indicator of the variety.
b. an indicator of quality.
c. a measure of scarcity.
d. a reflection of status quo pricing. e. a measure of the income effect.

Answer 1

Answer:

The correct option is B, an indicator of quality

Explanation:

Premium brands are highly priced goods that command leadership status in their market segments because they are perceived to offer basic brand's benefits as well as additional benefits to consumers.

In identifying these type of brands, their prices could be a signal to their high-end status.

Option A is wrong because high price tells nothing about the variety of a brand.

Option C, a measure of scarcity , is also a deviation from the point,as price does not give any information concerning scarcity of an item,especially when item is a luxury brand and not a basic necessity.