In the context of microeconomics, what is it called when small businesses focus on narrow market niches or specific product needs?

• A. Market segmentation
• B. Product differentiation
• C. Niche marketing
• D. Price discrimination

Answer: (C)

Verified step by step guidance

1. Understand the concept of market segmentation: This is when a market is divided into distinct groups of buyers with different needs or characteristics.
2. Recognize product differentiation: This refers to a firm's strategy to make its product appear different from competitors' products to attract a specific group of consumers.
3. Identify price discrimination: This occurs when a seller charges different prices to different consumers for the same product, based on willingness to pay or other factors.
4. Focus on the idea of small businesses targeting narrow market niches or specific product needs: This strategy involves concentrating efforts on a specialized segment of the market rather than the broader market.
5. Conclude that the term describing this strategy is 'Niche marketing,' which means targeting a specific, well-defined segment of the market with tailored products or services.