Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 8

An advertisement in the local paper offers a "fully loaded" car that is only six months old and has only been driven 5,000 miles at a price that is 20 percent lower than the average selling price of a brand new car with the same options. Use precise economic terminology to explain whether this discount most likely reflects a "fantastic deal" or something else.