Sub: Economics Topic: Micro Economics
Question:
A brief explanation of a situation where “product differentiation” might exist in
a market and why it might be used by a firm.
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Describe a scenario wherein “product differentiation” might exist in a market and explain why it
might be used by a firm.
Solution:
Describe a scenario wherein “product differentiation” might exist in a market and explain why it
might be used by a firm.
The Production Differentiation looks to make a product more attractive by contrasting its
unique qualities with other competing products. Successful product differentiation creates a
competitive advantage for the seller, as customers view these products as unique or superior.
Generally, the product differentiation will exist in the Monopolistic Competitive market and
Oligopolistic market (rarely).
Under monopolistic competition products are differentiated. This is the outstanding feature of
this form of market. Otherwise monopolistic competition closely resembles perfect
competition. The fundamental difference between the two is that products are no more
homogenous. Goods produced are deliberately differentiated. By differentiation we mean the
goods are made to appear somewhat different and superior to those produced by other firms.
Product differentiation may be real or apparent.
** End of the Solution **
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