15 By providing better service, a firm is trying to:
A. Make demand less elastic
B. Make demand more elastic
C. Make supply less elastic
D. Make supply more elastic

Question

15 By providing better service, a firm is trying to:
A.    Make demand less elastic
B.    Make demand more elastic
C.    Make supply less elastic
D.    Make supply more elastic

BlackTom AI · Accepted Answer

Consider the scenario: a firm improves its service quality with the goal of affecting consumer purchasing behavior.
Option A: Make demand less elastic. This aligns with the idea that better service creates perceived value and differentiation, making customers less sensitive to price changes because switching to a competitor would entail loss of service quality or convenience. In other words, demand becomes more inelastic when value-added service reduces price sensitivity. 
Option B: Make demand more elastic. This would mean customers become more responsive to price changes, which is opposite to what enhanced service typically achieves; improved service generally decreases, not increases, price sensitivity. 
Option C: Make supply less elastic. Supply elasticity concerns how quantity supplied responds to price changes. Service quality improvements by a firm usually affect customer demand and competitive positioning more than the ease with which the firm expands or contracts supply; thus this choice misattributes the effect to supply responsiveness. 
Option D: Make supply more elastic. Similar to C, boosting service quality does not inherently change the ease of altering production in response to price; supply elasticity is driven by production capabilities, inputs, and technology rather than consumer-facing service levels. 
In summary, the intended effect of better service is primarily on demand-side behavior, reducing price sensitivity, which corresponds to option A. The other options either describe changes to demand elasticity in the opposite direction or misattribute the effect to supply elasticity rather than demand elasticity.

ECNM1116.36617.202230 Practice Quiz Monopolistic Competition

15 By providing better service, a firm is trying to: A. Make demand less elastic B. Make demand more elastic C. Make supply less elastic D. Make supply more elastic

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