Company X produces a single product Y.Company X runs an advertising campaign that they are sure will differentiate product Y from their competitors and make Y more attractive.Assuming they are correct,what will happen to the demand of Y and what should pricing strategy should they employ?

Question

Quizplus · Accepted Answer

If Company X is correct in their advertising campaign, then the product Y will become more attractive and differentiated from their competitors. This will make the demand for product Y less elastic, meaning that consumers will be willing to pay a higher price for it. Therefore, Company X should raise the price of product Y to maximize their profits.

Company X Produces a Single Product Y