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Substitute and Complement Goods

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2a. What should you do to maximize profits with respect to prices after you acquire a substitute product. Which prices should you change more?
2b. What should you do to maximize profits with respect to prices after you acquire a complement product?

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2a. For maximizing profit with respect to prices after the acquirement of a substitute product, various ways are possible. An augment in price will consequent in an augment in demand for its relevant substitute products. Therefore, it is obvious that if high substitutability occurs in two goods, the change in demand will be much higher. It implies that maximum profit is only possible, when customer gets quality product. These quality products also make possible to charge higher prices with the consumer (Siddiqui, 2006).

Furthermore, a substitute product is a product, which appears to be dissimilar, but can fulfill the same requirement in respect of another product. I can take a classic example of substitute product tea ...

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  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
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