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Advertising Relationship with Demand

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Consider two firms X and Y that produce identically tasting cold drinks. In order to increase the demand for its cold drink, firm X increase its advertisement outlay. However the advertising doesn't increase its demand in the long run. Explain why this must be the case.

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Solution explains the relationship between advertising and demand.

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If two firms produce identically tasting cold drinks any advertising will not increase its demand over its competitor. The only type of advertising that would work is one that tries to ...

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