Q: Why did Michael’s grades drop after the holidays?
A: Because everything was marked down!

Explanation: The holidays refers to the time of the year between Thanksgiving and New Year’s Day.  It is a time when lots of people by many gifts for various occasions (remember, these jokes mostly come from the United States and therefore reflect its humor and some of its customs).  After the holidays stores have sales to get rid of merchandise that did not sell before the holidays; when an item is “on sale” the prices are “marked down.”

When a student looses points on an assignment his or her grade is marked down. This joke plays on the phrase “marked down.”  If everything is marked down then it looks like Michael’s grades came down too.  Perhaps he needs to study a bit more!