Question

If two rival firms’ products are on the indifference line of the cost benefit tradeoff, then explain what does this mean. (50 words) Indicate on your value map where would a successful product that is offering superior value be placed? (Use a clearly marked cross) Give two possible reasons that explain the position on the value map for this successful product. (about 50 words)

Answer 1

Indifference Line gives the various points on a line where the consumer is indifferent between the two rival firms' products. It gives the points where the consumer derives the same level of satisfaction consuming the products of two rival firms'.

If two rival firms' products are on the indifference line, it means the consumer derives same level of satisfaction and incurs the same cost and derives same benefit by consuming the products of rival firms.

Value Map is a trade off between price and benefit. A successful product offering superior value lies on the right hand side matrix offering high benefits and available at low cost.

Value = Benefit / Cost

A superior product offers Many benefits and is of low priced.

Reasons for the position on the value map for the successful product :

• As the product offers many benefits, thus it is of superior value.
• Product is available at low price, so it is of high value.