Question

In general, the greater the degree of product differentiation (A) The less elastic is the demand curve. (B) The more elastic is the demand curve. (C) The smaller is the firm’s profit. (D) The more intense is competition. (E) The greater the chance of customers switching suppliers.

Answer 1

Letter A is correct. The less elastic is the demand curve.

Step-by-step explanation:

Market differentiation occurs when a company uses innovation processes that add quality and technology to products and services, in order to be perceived by consumers, and help in the search for product leadership. This effect causes a behavior in the price elasticity of demand, which means that the higher the degree of differentiation of a product, the higher its price, which corresponds to the less elasticity of demand than in a scenario of perfect competition.