In which of the following product markets should we see a higher price markup?
A) one with lots of substitutes
B) one with few substitutes
C) one with a very elastic demand
D) one for a commodity good

Question

Quizplus · Accepted Answer

A product market with few substitutes will typically have higher pricing power for producers, allowing them to charge a higher price markup. With limited substitutes, consumers have fewer options to turn to if prices increase, making the demand for the product more inelastic. Conversely, a product market with lots of substitutes will have more competition driving down prices and reducing the price markup.

In Which of the Following Product Markets Should We See