How does advertising influence the demand for goods and the shape of the demand curve?
What will be an ideal response?
Advertising can increase the demand for a particular good, and price elasticity can make the shape of the demand curve steeper. What that indicates is that demand can shift to the right and become steeper as well. If the demand curve is steep, demand is more inelastic. Inelastic demand occurs when consumers have fewer substitute goods and buyers are not as responsive to changes in price. If price rises, some consumers will stop buying, but many will continue to purchase the good. Advertising creates brand loyalty, which is similar to the concept of inelastic demand. If consumers are brand loyal, their demand becomes more inelastic because they do not see substitutes available to them.
You might also like to view...
An increase in the output gap causes the demand for real balances
A) to rise and the interest rate to fall. B) to fall and the interest rate to rise. C) and the interest rate to fall. D) and the interest rate to rise.
If producing more output has no effect on average cost then
A) there are diseconomies of scale. B) there are economies of scope. C) there are diseconomies of scope. D) there are no economies of scale.
A balance-of-trade deficit exists if
A. the dollar value of exports exceeds the dollar value of imports. B. the dollar value of imports exceeds the dollar value of exports. C. money outflows exceed money inflows. D. money inflows exceed money outflows.
Aggregate demand in the economy is equal to
A) Consumption, investment and government spending. B) Consumption, investment and net exports. C) Full employment output. D) None of the above.