Marginal Utility for any product

Marginal Utility for any product

Answer 1)

A Company/Country enjoys an absolute advantage in producing a product if it can produce that product at a lower price or at higher productivity in comparison to other companies/countries. While a company/country enjoys a comparative advantage in the production of a good if it can produce the good at a lower opportunity cost when compared it to the other companies/countries. In this case since Justcookbooks.com became wildly successful in U.S. Considering dearth of any other information, it will be safe to assume that in a normal scenario a product can be successful in comparison to its competitors if it enjoys an absolute advantage over one of the key areas mentioned above. Thus in the present scenario it will not be wrong to conclude that the Company must be enjoying an absolute advantage in US.

Answer 2)

Becoming a multinational corporation might sound very encouraging for any company but it surely brings with it a lot of issues and problems. Some of them are mentioned and discussed below:

  • Cultural Difference: Each and every country has a culture of its own. People in different countries live differently and behave differently. It is very important for a company going multinational to keep these differences in mind before launching its product in overseas market. That is why it is always said that Multinational Corporations must be global but think local. A product doing very well in one country doesn’t guarantee its success in another market. For instance, if we consider two different markets like India and U.S and if a product is doing well in the Indian market, it doesn’t give any guarantee that the product will do well in the U.S market. To think the simplest of all examples is a particular brand with a certain variety of clothing may be very successful in US but may not be in demand in India and vice-versa.
  • Legal & Regulatory Environment: Considering the fact that each country has its own legal environment it is very important for a company becoming multinational to be well aware of the legal and regulatory environment of the other countries. The company would definitely want to know about the political relations between the governments as it might impact its arrangement with the contractors and other parties. The Company would definitely not want to enter a market without knowing the legal regulations and finding itself in a soup. Also, the Multinational Corporations must be well versed with the Tax Regulations of other countries before entering into different markets.
  • Currency Exchange: The Company would surely want to keep in mind the fluctuations in the currency exchange which the Company would be facing after becoming multinational. They can think of different hedging techniques to keep them away from the fluctuation shock.
  • Funding: Another issue which the Company might be facing is with respect to the funding. The Companies need to take a very important decision with respect to its funding in the international market. They need to be careful of not withdrawing the funds from the domestic market where it is doing well and funding the growth in the international market as it might just back fire for the organization.

Answer 3)

Marginal Utility for any product is defined as the extra utility obtained by consuming one more unit of the product. As per the Law of Diminishing Marginal Utility the utility for a product will start diminishing as we consume more and more of goods, this is because the Total Utility increases as more and more goods are consumed but at a diminishing rate. In some cases like water when the person is very thirsty the marginal utility of water might increase first for the person and starts decreasing later. While in other circumstances it will start decreasing from the next consumption. Even in the current scenario, if I buy my third luxury automobile, the marginal utility of buying this automobile will be less than the marginal utility when I bought the second automobile and more less than the marginal utility when I bought the first automobile.


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