The purpose of advertising & other forms of non-price competition by a firm is to shift the Demand curve to the
A)Right
B)Left
&
A)Make it more elastic
B)Make it more inelastic
What is the reason behind the answer?
The purpose of advertising and other forms of non-price competition by a firm is to shift the demand curve to the right (option A) and make it more elastic (option A).
When a firm engages in advertising and other non-price competition strategies, it aims to increase the demand for its product or service. By doing so, the firm can capture a larger market share and potentially increase its profits.
Shifting the demand curve to the right means that at any given price, the quantity demanded will be higher compared to the previous demand curve. This shift occurs because advertising and non-price competition create awareness, inform consumers about the benefits of the product, and differentiate it from competitors. As a result, more consumers are attracted to the product, leading to an increase in demand.
Making the demand curve more elastic means that a change in price will have a relatively larger impact on the quantity demanded. When a firm engages in advertising and establishes brand loyalty or a perceived differentiation, it can make consumers more responsive to price changes. In other words, if consumers highly value the attributes of a certain brand, they may be less likely to switch to a competitor solely based on price changes. As a result, the demand curve becomes more elastic.
Therefore, the purpose of advertising and non-price competition is to shift the demand curve to the right, indicating an increase in demand, and simultaneously make it more elastic, indicating increased responsiveness to price changes.