Question

Recently, a home delivery shaving company, "Harry's Razor" claimed it can sell higher quality razors at a lower price because it owned the factory that makes the razors. what conidtions must hold for this assertion to be true?

Answer 1

Consideration that must hold for this assertion to be true are as follows-

A. when it will reduce the selling price, the demand of the razors will be going up which will help the company in order to maximize its profits.

B. The income level and the disposable income of these individuals in the economy who are customers of this company should not be changing

C. There is no change in the technology and there is no additional market player and tactical shift in the industry.

D. the macroeconomic situations in regards to the inflation and interest rate along with Economic cycle has not changed.

E. It has also assumed that Markets and consumer are highly rational and they will be going for reduced prices and it will increase its sales.

F. it is assuming that the consumers are conservative and they are always looking to save money and they will be buying cheap products more.

G. it also assumed that it will be keeping the quality of this product similar and it will just reduce the price.