Final answer:
The local boutique may respond to the competitor's price increase by adjusting their own prom dress prices, influenced by market demand and competitive strategies.
Step-by-step explanation:
Next season, if the rival boutique's price increase affects the market, the prom dresses at the local boutique may adjust in price due to changes in demand or competitive pricing strategies. Competition can lead to either price matching or re-evaluation of pricing strategies to maintain customer base and sales volume.
For example, if the competition's price increase leads to fewer sales for them and customers start looking for cheaper options, the local boutique might keep prices steady or increase them slightly, but not as drastically. This is similar to how markets reach equilibrium, where the quantity supplied equals the quantity demanded, providing no incentive to change prices.