Question

Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50, then it is a good offer, but if he wants to buy something with a price of $500, then it is not a good offer. This is an example of: the proper application of the Cost-Benefit Principle. inconsistent reasoning because prices are sunk costs. rational choice because saving 40% is better than saving 4%. inconsistent reasoning; saving $20 is saving $20.

Answer 1

inconsistent reasoning; saving $20 is saving $20.

Explanation:

When we buy something for $ 50 we save $ 20 which is

20/50 * 100= 2/5* 100= 0.4*100= 40 %

When we buy something for $ 500 and save $ 20 it means that we are saving

20/500 * 100= 2/50* 100= 0.04*100= 4 %

Now if we compare 40 % to 4 % we can ourselves see that there is a difference of 36 % which is large enough to drop out the high priced items.

There is inconsistent reasoning for discount pricing.

So it is inconsistent reasoning; that only $ 20 can be saved on all items no matter what the prices are .

The offer is beneficial for only good for low priced items.