Advertising claiming superior quality of a product makes its demand
options:
More elastic
Less elastic
Perfectly elastic
None of the above
The correct answer and explanation is:
The correct answer is Less elastic.
When advertising claims the superior quality of a product, it can influence the demand for that product by making it appear more attractive to consumers. This perceived superiority often leads to a situation where consumers are less sensitive to price changes, resulting in a decrease in price elasticity of demand.
In economics, the concept of elasticity refers to how sensitive the quantity demanded of a good is to a change in its price. If the demand for a product is more elastic, consumers are more responsive to price changes—meaning if the price increases, demand will decrease significantly, and vice versa. On the other hand, if the demand is less elastic, price changes do not significantly affect the quantity demanded.
When an advertising campaign highlights a product’s superior quality, consumers may be willing to pay a higher price because they believe they are getting better value, even if the price increases. This reduces the sensitivity of demand to price, which means the product becomes less elastic. Essentially, consumers view the product as a unique offering with qualities that set it apart from others, creating brand loyalty and making them less likely to switch to a competing product even if the price rises.
For example, luxury brands often use advertising to promote the high quality of their goods, making their products less price-sensitive. Consumers may continue purchasing these products, even at higher prices, because they associate the brand with quality and prestige. Therefore, the demand curve for such products is less elastic, and the company can increase prices without losing many customers.
In conclusion, advertising that claims superior quality generally reduces the elasticity of demand for a product by creating differentiation and loyalty among consumers.