Brad always buys and uses Nike brand golf balls.If he finds a Titlelist or Callaway ball in the rough,he gives it away.Brand loyal golfers like Brad allow Nike to charge a higher price and not lose many sales.By building a strong brand,Nike has effectively:
A)increased the income effect for its products.
B)increased the cross-price elasticity for its products.
C)reduced the competitive parity point for its products.
D)shifted the golf ball market from a monopoly to pure competition.
E)reduced the price elasticity of demand for its products.

Question

Quizplus · Accepted Answer

Brad's brand loyalty to Nike allows Nike to charge a higher price for their golf balls because he is not willing to switch to a different brand, making the demand for Nike's golf balls less price-sensitive or inelastic. Therefore, by building a strong brand, Nike has reduced the price elasticity of demand for its products.

Brad Always Buys and Uses Nike Brand Golf Balls