Question

"Your research, Adams, should focus on making the products smaller and the prices bigger."

Explain the economic reasoning behind the caption.

Answer 1

When the products are smaller, there are a lot of perks that the company can get:

- The materials used for production will be in lesser amount.

- The amount of products that can be distributed with a single shipment will be in larger amount

- The amount of products can be put on shelves among the shops/retailers will be larger in amount

If we combined these perks with higher price for the product, the profit margin of the product will be higher. This means that the seller can obtain higher amount of profit by selling lesser amount of product.