Suppose that a rap group called RG2 has released its first CD with Live Records at an intended list price ofâ $14.99. Music stores have discovered that they can markup the price toâ $17.99 with continued strong sales. What information does this higher price convey to the recordingâ label:
A) The recording label should cut back on the production and distribution of RG2â's first CD
B) The price of the CD was too expensive to begin with
C) The markup by music stores indicates a surplus of RG2â's CD on store shelves.
D) The recording label should expand the production and distribution of RG2â's first CD

The band sold its first CD to music stores for $14.99. The music stores added mark up of $2 and sold to the public for $17.99. people are ready to purchase CD's even at higher price. This suggest that there is strong demand for the band's CD in the market.

In this case, Live records should increase production and distribution of band's CD to take advantage of increased demand, thereby gaining from it.