Question

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. focused on the competitive parity point for its products.B. reduced the price elasticity of demand for its products. C. increased the income effect for its products.D. increased the cross-price elasticity for its products.E. shifted the golf ball market from a monopoly to pure competition.

Answer 1

B. reduced the price elasticity of demand for its products.

Step-by-step explanation:

Price elasticity of demand is a measure of the sensitivity of demand for a good or service to changes in the price of that product. We say that the price elasticity of demand is elastic when a percentage change in the price of this good has major impacts on demand. On the contrary, we say that the price elasticity of demand is inelastic when variations in the price of goods have little or no influence on demand.

It is usually expected that golf balls are substitute goods as they are similar products. However, in the case described, Nike was able to differentiate its product, making the consumer become loyal, even at a higher price, ie, the sensitivity (elasticity) of demand for the Nike golf ball decreased over time.