A firm experiences a price elasticity of 0.3 (expressed as a positive number) as it drops a brand's price from a high to a medium price level. This price elasticity percentage suggests that the brand
A) is in a market dominated by price shoppers.
B) is in a market characterized by low brand loyalty.
C) has elastic demand.
D) has strong product differentiation.

Question

Quizplus · Accepted Answer

The price elasticity of 0.3 indicates that the demand for the brand is relatively inelastic, meaning that a price change results in a smaller percentage change in quantity demanded. This suggests that the brand has strong product differentiation, as consumers are less sensitive to price changes, likely due to unique features or perceived value that distinguishes it from competitors.

A Firm Experiences a Price Elasticity of 0