Final answer:
Advertising can make a firm's demand curve more inelastic or shift it to the right, resulting in the ability to sell more or at a higher price. The demand function reflects the impact of advertising on price and quantity demanded. The success of such campaigns depends on the product's nature, market, and campaign effectiveness.
Step-by-step explanation:
The student's question pertains to how advertising impacts the demand for a product in the context of monopolistic competition. When a firm with significant market power undertakes an advertising campaign, it has the potential to either make the demand curve more inelastic or shift the demand curve to the right, resulting in increased demand. The demand function provided, P = 100 - 3Q + 4√A, illustrates the relationship between price (P), quantity demanded (Q), and advertising expenditure (A).
A successful advertising campaign can lead to an increased demand for a firm's product, enabling the firm to either sell more quantity at the same price or sell at a higher price, which results in increased profits. Increased demand from advertising can be viewed as a shift to the right in the demand curve. This shift often allows companies to charge a higher price, increase their quantity supplied, or both.
It's important to note that the effectiveness of advertising can vary, and not all industries or companies will experience the same results from advertising expenditures. The degree to which a firm can increase demand through advertising is often dependent on the nature of the product, the market structure, and the effectiveness of the advertising campaign itself.