Question

There are a wide variety of breakfast cereals on the marketin grocery stores, they usually take up an entire aisle. As a result, it is possible to purchase many cereals that are highly similar but have small distinguishing characteristics that differentiate them.

a. List some cereals that are very close substitutes for one another

b. What does society gain from having all of these varieties of breakfast cereal?

c. What does society lose by having all of these varieties of breakfast cereal?

Answer 1

Ans a) the substitutes are kellogs, nestle, chex, cheerios general mills.

B) the society gains the variety of breakfast cereals which have different nutritional components. Product differentiation provides better products with an innovation approach and comptetion leads to efficient outcome.

C) by having these varieties of products the loss to society is that these products become expensive. Product differentiation in relation to related goods requires a lot of research, monitoring and advertising which leads to high cost of product and the product becomes expensive.