More difficult question about
promotion. Just remember some basic micro-economic facts: when "something"
happens to the entire market, it can have an effect on the total demand
curve, so for instance an increase in revenue can shift the demand curve.
The same applies to advertising: when an advertising campaign is launched,
it has an effect on the entire demand curve, making the product more desirable
(hopefully) so that a larger quantity will be purchased at some price level
or the same quantity will be purchased at a higher price. Alternatively,
advertising can also increase loyalty to a brand, making it less sensitive
to price increases, i.e. more inelastic. The correct answer is therefore
7. When a firm uses promotion,
its basic objective is to:
make its demand curve more inelastic.
shift its demand curve to the right.
make its demand curve more elastic.
shift its demand curve to the left.
both a) and b).