Firms seek to differentiate their product A. to strengthen their demand and to make it more inelastic. B. to avoid state and federal regulation. C. to create an illusion of value. D. to strengthen their demand and to make it more elastic.

Question

Addison Snow

Business

18 December, 09:57

Firms seek to differentiate their product A. to strengthen their demand and to make it more inelastic. B. to avoid state and federal regulation. C. to create an illusion of value. D. to strengthen their demand and to make it more elastic.

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Answers (1)

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Andrew Dean · Answer 1

A. to strengthen their demand and to make it more inelastic.

Explanation:

Elasticity is a measure of the sensitivity of demand to the price of a product. If demand is elastic, bidders should avoid raising prices as demand decreases considerably. Conversely, when demand is inelastic, consumers are less sensitive to price changes. Thus, price increase does not have much impact on product demand. Thus, firms tend to adopt strategies to make their products inelastic. One such strategy is to add added value to the product as differentiations so that the consumer considers not replacing the product with a competitor that sells the same product but without differentiation. In other words, differentiation is a way to customize the product and make the customer loyal.