Question

XYZ​ firm, the leading producer of leather goods in its country is planning to expand its business. Industry experts identify Asia as a potential target market. They report that substitute​products, particularly in​ India, are highly priced.​ Darren, the operational​head, feels that exporting their product to India is a good idea. According to​ him, their price advantage alone will ensure good sales.​ However, his​ colleague, Mark, who is also the head of product​ development, feels that Darren is too​ optimistic, and that this venture may not turn out to be as profitable as Darren expects it to be.Darren's view is based on which of the following​assumptions?A.Imports in India usually exceed exports from the country.B.XYZ's product is a close substitute for the locally available goods.C.Consumers in India are extremely loyal to national brands.D.India has high import tariffs.E.The quality of the domestically produced substitutes is not as good as​ XYZ's product.

Answer 1

Answer:

The answer is: B.) XYZ's product is a close substitute for the locally available goods.

Explanation:

A substitute product can be defined as a good a consumer perceives as similar or comparable to another good (e.g. cow and chicken meat). Generally speaking, when the price of one of these goods increases, the demand for its substitute good increases.

In this case, Darren believes that since XYZ´s product is cheaper it should sell better than its competition (close substitute goods).