The article below discusses the effect advertising can have on elasticity. Thjere is also a good acronym to help you learn all the factors affecting elasicity.....
How can a commercial like the one below decrease the price elasticity of demand for a product like Molson Canadian beer? After this extremely successful commercial was released in Canada, Molson’s share of the beer market increased by 3%, while that of Labatt’s its largest competitor, shrunk by 3%.
Reminder: The factors that affect the price elasticity of demand for a particular good are
S -the number of substitutes the good has.
P – The proportion of income the good is of the consumer’s income.
L - Whether the good is a luxury or a necessity
A - Whether the good is addictive
T - The amount of time consumers have to respond to a change in the price
Discussion Questions:
1.How can a successful advertising campaign reduce consumers’ responsiveness to changes in price of a good like Molson beer?
2.Why is it in the interest of a firm like Molson to decrease the price elasticity of demand for its product?
No comments:
Post a Comment