Final answer:
Each cell in a product-market grid represents a possible market and product combination for a company, used for strategic planning and determining supply and pricing based on economic calculations.
Step-by-step explanation:
Each cell in the product-market grid represents a unique combination of products and markets that a firm can target. The grid is a strategic tool used to identify opportunities for market penetration, market development, product development, and diversification. By analyzing different cell combinations, firms can determine how much of their products to supply at what price, taking into consideration factors related to total revenue, marginal revenue, total cost, marginal cost, and average cost.
Firms use this framework to calculate the optimal production level and pricing strategy by understanding the economics of supply and demand. The cells help in the visualization of market strategies and economic concepts, allowing businesses to create a structured approach to exploring new or existing markets with various products.