Suppose a factory manufactures dinner plates. They sell two types of plates: first-quality plates (perfect plates)for a price p1and second-quality plates(slightly blemished plates)for a smaller pricep2. They sell both plates in two types of stores: outlet store next to the factory (no shipping required)and regular stores around the country (a shipping cost of sis required, so the price of the plate there is p+s). Assume that consumer tastes with respect to plates are the same everywhere, both plates are normal good income effects are small (because people spend a small share of their income on pates).

It turns out that the factory sells much more blemished plates at the outlet store than at the regular store. Use economic theory to explain why. Hint: you can use a numerical example p1=2, p2=1, s=1

for the ease of exposition.