If advertising decreases the elasticity of demand for specific brand names of hard liquor, 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 hard liquor, it means that consumers become less sensitive to changes in price for those specific brands. This gives firms the ability to exercise more market power, as they can increase prices without causing as much of a decrease in demand.

If Advertising Decreases the Elasticity of Demand for Specific Brand