Answer
If advertising makes consumers more loyal to particular
brands, it could ______ the elasticity of demand
and ______ the markup of price over marginal cost
c. decrease, increase
Work Step by Step
When consumers become more loyal to a particular brand, they become less concerned with the price that this brand charges, thus making the demand for that brand less elastic.
When this firm faces a less elastic demand curve, it can increase its profits by charging a larger price, thus increasing its markup of price over marginal cost.
