As product differentiation increases,the price elasticity of demand falls and the firm increases its market power.

Question

Quizplus · Accepted Answer

As the product differentiation increases, consumers become less sensitive to price and more willing to pay a premium for the unique features or quality of the product. This results in a decrease in price elasticity of demand and a stronger market power for the firm with the differentiated product.

As Product Differentiation Increases,the Price Elasticity of Demand Falls and the Firm