When companies hire celebrities to advertise their products,they are attempting to make the demand for their product more ____________. If this strategy is successful,the firm can raise both ____________ and ________________.

Question

Quizplus · Accepted Answer

When companies hire celebrities to advertise their products, they are attempting to make the demand for their product more inelastic (less sensitive to price changes). If this strategy is successful, the firm can raise its price and still generate the same or higher total revenue. Therefore, the company can increase its total revenue by raising the price of the product, which can only happen if the demand is inelastic.

When Companies Hire Celebrities to Advertise Their Products,they Are Attempting