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.
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As more efficient capital equipment becomes available, the demand for labor will ________, the real wage will ________, and the quantity of labor hired will ________
A) increase; increase; increase B) increase; decrease; remain the same C) increase; remain the same; decrease D) increase; remain the same; increase
If the government provides a subsidy of $1 per hour to employers for hiring workers, ________
A) the equilibrium real wage will increase B) labor demand will decrease C) the equilibrium employment will decrease D) labor supply will increase