Brad always buys and uses Nike brand golf balls.If he finds a Titleist 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

By building a strong brand, Nike has reduced the price elasticity of demand for its products. Brand loyal customers like Brad are less price sensitive and are willing to pay a higher price for Nike golf balls, which allows Nike to maintain higher prices without losing many sales. Therefore, Nike's brand strength has reduced the price elasticity of demand for its products.

Brad Always Buys and Uses Nike Brand Golf Balls