Question

When a new product is promoted and sold in a limited geographical area to determine customer reaction and sales figures it is called?

1) Decrease advertising costs
2) Add features to the product such as special or limited editions
3) Limit expansion into new markets
4) Test marketing

Answer 1

Test marketing is the promotion and sale of a product in a limited area to assess consumer reaction and sales. In monopolistic competition, advertising differentiates products and can alter a product's perceived demand curve, affecting sales and prices.

Step-by-step explanation:

When a new product is promoted and sold in a limited geographical area to gauge consumer reaction and sales figures, this practice is known as test marketing. Test marketing allows a company to gather data and understand how their product performs before a full-scale launch. In the context of monopolistic competition, advertising plays a critical role in differentiating a product from its competitors, which can make the demand curve either more inelastic or shift it to the right, resulting in potentially higher sales or prices.