Question

When consumers are brand loyal, the term inelasticity of demand is often used. This means that

a. consumers won’t accept price increases for a particular product category.
b. consumers are less sensitive to price increases for a brand they like.
c. firms have the flexibility to lower prices if this will increase sales.
d. firms may decrease production in order to increase demand.

Answer 1

The correct answer is b. "Consumers are less sensitive to price increases for a brand they like."

Step-by-step explanation:

The term "elasticity of the demand" is used to explain the way the quantity demanded of a good or service responses to a variation of its price.

A normal demand will show you that when a good's price increases, it's quantity it's decreased in equally proportion.

A very elastic demand, will show you that when a good's price increases, it's quantity demanded it's decreased way more than the relative amount the price has increased. An example of goods with elastic demand is olive oil, people will stop buying them and will find a replace (like sunflower oil) if its price increase too much.

Opposite to that, a very inelastic demand will show you that when a good or service's price increases, the quantity demanded of that item won't be as reduced as the price was increased. An example of that is a Ferrari Car, it's exclusivity and loyalty from its costumers will allow Ferrari to raise the price of it's cars and the demand won't go down.