Damend and supply question

2007-11-14 3:49 am
"Advertising has two-fold effect: it increases demand for the targeted product and it reduces the responsiveness of quantity bought to a change in price at the existing price level."
True or Fales, and Explain.

回答 (1)

2007-11-14 9:14 am
✔ 最佳答案
It is true that advertising increases demand for the advertised product. Advertising makes the product known to more people. It may also make consumers switch from another competing product.

The second part can be true or false. If advertising creates brand loyalty to a product, it will reduce demand elasticity to some extent. When the advertising has persuaded people into believing it is a better product than its competitors, it reduces to responsiveness of quantity bought to price change.

The second part is false when advertising is also carried out by competing products. Advertising allows information of substitutes or competing products to be known by more poeple. The availability of substitutes increases the elasticity of demand as people can switch to another product when the price of the advertised product increases.


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