If advertising decreases the elasticity of demand for specific brand names of beer, we would expect firms to be more able to exercise market power.

Question

Quizplus · Accepted Answer

When advertising decreases the elasticity of demand for specific brand names of beer, consumers become more loyal to those brands and are less likely to switch to other brands, making it easier for firms to exercise market power by increasing prices without losing customers.

If Advertising Decreases the Elasticity of Demand for Specific Brand