PT157 S3 Q18 ExplanationConsumer demand for personal computers

Answer choices, explained

1. A

   Helps Explain8% picked this

   Rapid innovation in computer technology increases the likelihood of a store’s

   Rapid innovation causing stock obsolescence means retailers lose money on unsold inventory. Even with rising demand, if yesterday's model is worthless tomorrow, retailers cannot maintain high margins. This explains why PC margins are lower than for more stable tech products.

   8%
2. B

   Correct53% picked this

   Satisfaction with their first personal computer tends to make customers very loyal to

   Why this is right

   Brand loyalty might actually deepen the paradox rather than resolve it. If customers are loyal to a brand, that brand has less competitive pressure and could theoretically raise prices without losing customers — which would increase margins, not explain why they are low. High demand plus brand loyalty should mean higher margins, not lower ones. This does not explain why PC margins are low.

   Skill tested: Paradox · how this choice captures the argument's function is the move to repeat next time.

   53%
3. C

   Helps Explain27% picked this

   A customer needs more help from store employees when buying a personal computer than when

   If PCs require more employee assistance than other tech items, retailers face higher labor costs per PC sale. Higher overhead means lower profit margins even with strong demand. Other tech items sold with less employee help have lower costs and thus higher margins.

   27%
4. D

   Helps Explain9% picked this

   Many retail stores have low prices on personal computers in order to bring in customers who might

   PCs as loss leaders — priced low to attract customers who then buy high-margin accessories and software. Retailers intentionally keep PC margins low as a traffic-generation strategy, similar to how movie theaters price tickets low and profit on concessions.

   9%
5. E

   Helps Explain4% picked this

   An increase in the number of discount retail outlets selling personal computers has intensified the

   More discount outlets create intense price competition, preventing any single retailer from charging high margins. Even with rising demand, competition among many sellers keeps prices — and therefore margins — low. Other high-tech items may face less retail competition.

   4%