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Microeconomics: Advertising and Demand Curves Case Study

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Updated: May 7th, 2021

Think of some advertisements which deliberately seek to make demand less elastic.

To make demand more elastic, organizations tend to promote and advertise their brand as the main one in the industry. They make the targeted audience consider that there is no other company that can produce a product that cannot be changed by any other items available on the market. It seems that this organization tries to turn into a monopoly in the eyes of the general public because monopolies are the only businesses that produce inelastic demands.

It is rather difficult to recollect some advertisement that was maintained by a monopoly, but different organizations tend to make their demand as inelastic as possible so that customers refer to their offerings anyway. For example, Sky Sports tend to be among the most popular networks that provide its customers with the opportunity to watch a wide range of dominant premium sports in high quality. The range of offerings that are offered by this organization is so broad and efficient that no other network can substitute it. That is why sports fans are likely to agree to pay more if the company decided to make its product more expensive and increases premiership pay per view, for example.

A similar thing can be said about Coca-Cola. Even though it is in constant competition with Pepsi, the representatives of the general public for many years already associate Christmas holidays with Coca-Cola advertisements. They remain loyal regardless of other offerings and always choose Coca-Cola’s product. In this way, the company strongly promotes its brand. Its clients believe that no other product can substitute this one even though there are some similar items in the market.

Imagine that “Sunshine” sunflower margarine, a well-known brand, is advertised with the slogan, “It helps you live longer.” What do you think would happen to the demand curve for a supermarket’s brand of sunflower margarine? Consider both the direction of shift and the effect on elasticity. Will the elasticity differ markedly at different prices? How will this affect the pricing policy and sales of the supermarket’s brand?

The appropriate advertisement is significant not only for start-ups and their new products but also for well-known brands that are willing to improve their performance and take a position among the leaders of the market. Using a slogan that appeals to the representatives of the general public and the targeted audience, in particular, can make a great step forward. Considering this information, it may be stated that the success of “Sunshine” can be determined only when the organization starts operating. Before such action is maintained, the outcome of the implementation of the new promotion strategy can be discussed considering the company’s targeted market and its characteristics. These variables allow determining whether the slogan generated by “Sunshine” appeals to its clients. It is critical to define if they agree with it in terms of the feature of sunflower to make people live longer.

If the company’s customers believe in the slogan and think that sunflower has some positive influences on their health and duration of life, they are likely to refer to “Sunshine” even if the organization makes its prices higher. As a result, the product turns out to be more inelastic. Company’s clients who believe that non-sunflower margarine deprives them of the opportunity to preserve their health and live longer tend to be not ready to start using products of other brands. Thus it is expected that the demand for “Sunshine” shifts to the right and becomes less elastic. If the situation turns out to be quite the opposite, and “Sunshine’s” clients do not share their ideas regarding its influence on the life duration. As a result, the company’s demand will shift to the left and become more elastic.

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"Microeconomics: Advertising and Demand Curves." IvyPanda, 7 May 2021, ivypanda.com/essays/microeconomics-advertising-and-demand-curves/.

1. IvyPanda. "Microeconomics: Advertising and Demand Curves." May 7, 2021. https://ivypanda.com/essays/microeconomics-advertising-and-demand-curves/.


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IvyPanda. "Microeconomics: Advertising and Demand Curves." May 7, 2021. https://ivypanda.com/essays/microeconomics-advertising-and-demand-curves/.

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IvyPanda. 2021. "Microeconomics: Advertising and Demand Curves." May 7, 2021. https://ivypanda.com/essays/microeconomics-advertising-and-demand-curves/.

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IvyPanda. (2021) 'Microeconomics: Advertising and Demand Curves'. 7 May.

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