A discount shoe manufacturers advertisement suggests that...

A discount shoe manufacturer's advertisement suggests that they are almost as good as the name brands but better manufacturer believes that the advertisement will Make the demand for its product more inelastic Make his customers less price sensitive Cause people to directly compare his product to the name brands Cause people to pay more for his shoes than for name brand shoes

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00:01 So here we have this story about nike golf balls and how nike golf balls are superior product from the perspective of this golfer.

00:09 Because he only buys nike, nike doesn't have to compete on price, right? in a competitive market where everyone is equal, you can just sort of shut you, you buy what is ever cheapest.

00:20 But he doesn't buy what's ever cheapest.

00:21 He buys what he wants, right? let's throw out the ones that are obviously wrong first.

00:27 So focus on competitive parity is wrong, right? in fact, nike here is doing the opposite.

00:32 It doesn't want to compete with title way or cal list.

00:35 It's trying to differentiate its product, it's trying to charge a different price than titleist or calway.

00:40 It does not want to be in similar competition, right? we all know that in perfect competition, profits get competed down to zero.

00:48 We are trying to avoid perfect competition.

00:51 So we can rule out e as well, right? in pure competition, everyone sells the same product at the same price.

00:57 But here, we see that people don't perceive these products the same and they are charging higher prices, right? pure competition does not support different prices.

01:08 Next, i'm going to rule out c, the increased income effect.

01:11 The income effect says as brad's income changes, he will buy more balls...

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