The price of a car is about 10% higher if you buy it in NYC than...
The price of a car is about 10% higher if you buy it in NYC than if you bought it in Dallas.
a. Why is it surprising that there would be a price difference?
b. How might you explain why the price difference doesn't go away?
Homework Answers
a) it can actually be mentioned that if the cars are manufactured in Dallas and the facilities of service are available in Dallas then the transportation cost might be added to that of New York apart from the demand conditions prevailing which can actually result in higher price difference on the whole.
b.with the existing demand conditions even if the people are ready to purchase the car in New York, then it can be mentioned that forever new still maximizing and there would be no need for reduction of the price as the demand conditions are still prevailing on the whole and therefore disregarded can be mentioned result the price difference might not go away
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