How will the demand curve faced by a firm change when all the firms in an industry start advertising their product,compared to the situation when only this firm was advertising?
A)The demand curve will become perfectly price inelastic.
B)The demand curve will become less elastic.
C)The demand curve will become more elastic.
D)The demand curve will become more inelastic.

Question

Quizplus · Accepted Answer

When all the firms in an industry start advertising their product, the demand curve faced by an individual firm becomes more elastic. This occurs because advertising by all firms increases consumer awareness and knowledge about the products available in the market. As a result, consumers have more substitutes and can easily switch to other brands if they find a better deal. This increased elasticity of demand means that the firm has less pricing power and must be more competitive to maintain its market share.

How Will the Demand Curve Faced by a Firm Change