Question

Would you rather have efficiency or variety? That is, one opportunity cost of the variety of products we have is that each product costs more per unit than if there were only one kind of product of a given type, like shoes. Perhaps a better question is, “What is the right amount of variety? Can there be too many varieties of shoes, for example?”

Short answer

• Finding the proper or ideal quantity of variation is quite challenging.
• There can be too many varieties of shoes.

Step-by-step solution

Step 1. Introduction

Product differentiation is the process in which a product is made to stand out among its competitors by makign it slightly different than the others.

Step 2. Argument over the amount of variety

• It is very difficult to find out the right or optimal amount of variety because monopolistic competition does not provide efficiency which this leads to the fact that product differentiation is based on variety and innovation and high degree of product differentiation costs more and produced goods become expensive. It is not clear that what amount of variety i.e. too less or too many variety benefits the consumer.

Example of the market which can have too many varieties of shoes

There can be too many varieties of shoes for example in Indian market some people like to buy shoes of high valued and highly advertised brands like Nike, Skechers, Reebok, Adidas etc. Some individuals are content with a smaller selection of differentiated products sold at a lesser price, such as shoes from local businesses.