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AP Economics

AP Economics. Mr. Bernstein Module 68: Product Differentiation and Advertising December 12, 2013. AP Economics Mr. Bernstein. Product Differentiation Attempts by firm to convince consumers their product is different from competing products By making them different:

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AP Economics

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  1. AP Economics Mr. Bernstein Module 68: Product Differentiation and Advertising December 12, 2013

  2. AP EconomicsMr. Bernstein Product Differentiation • Attempts by firm to convince consumers their product is different from competing products • By making them different: • 4-wheel drive vs. 2-wheel drive • Or just by convincing consumers they are different! • Either way, firms can charge a higher price if they can differentiate • Bleach is bleach

  3. AP EconomicsMr. Bernstein Types of Differentiation • Differentiation by Style • Deep-dish, regular or cheesy crust pizza • Consumers regard them as imperfect substitutes

  4. AP EconomicsMr. Bernstein Types of Differentiation • Differentiation by Location • Common in service industries such as groceries, gas • Differentiation by Quality • BMW vs. Hyundai; consumers often pay a higher price even if difference is only perceived

  5. AP EconomicsMr. Bernstein Is Product Differentiation Efficient? • Advertising can provide useful information and aid efficiency • It can also waste resources and/or be misleading, reducing efficiency

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