Question

In: Economics

Which of the following statements concerning models of product differentiation, if any, are correct? The more...

Which of the following statements concerning models of product differentiation, if any, are correct?

The more new products draw their customers from those who currently are buying existing products in the same market, the more likely we have too much product variety from the point of view of efficiency.

The more new products draw their customers from those who currently are not buying existing products in the market in question (new customers to the market), the more likely we have too much product variety from the point of view of efficiency.

Models of product differentiation do not address the question of the efficiency of product variety.

The more new products draw their customers from those who currently are buying existing products in the same market, the more likely we have too little product variety from the point of view of efficiency.

The more new products draw their customers from those who currently are not buying existing products in the market in question (new customers to the market), the more likely we have too little product variety from the point of view of efficiency.

Solutions

Expert Solution

The first statement is correct as product differentiation is helping us gaining more customers from the market which will increase the sales of our product and more are the prduct variety more sales will be achieved. With this market share of our product will be increased resulting in increase the profits for the company. So we can say that the more new products draw their customers from those who currently are buying existing products in the same market, the more likely we have too much product variety from the point of view of efficiency.


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