Modifying a product to increase its “value added” benefits customers and can enhance supplier profits.

Modifying a product to increase its “value added” benefits customers and can enhance supplier profits. For example, suppose an improved version of a product increases customer value added by $25 per unit. (in effect, the demand curve undergoes a parallel upward shift of $25.)a. If the redesign is expected to increase the item`s marginal cost by $30, should the company undertake it?b. Suppose instead that the redesign increases marginal cost by $15. Should the firm undertake it, and(if so) how should it vary its original output and price??

Modifying a product to increase its "value added" benefits customers and canenhance supplier profits. For example, suppose an improved version of a productincreases customer value added…

 
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