Loyalty toward a brand makes other brands seem less substitutable, which decreases ______.

Loyalty toward a brand makes other brands seem less substitutable, which decreases ______.

• A. Cross-price elasticity
• B. Complementarity
• C. Income elasticity
• D. The price elasticity of demand

Answer: (D)

Loyalty to a brand reduces how easily customers switch when prices move, so demand becomes less sensitive to the brand’s own price. This lowers the price elasticity of demand, making it more inelastic—customers stick with the brand even if the price goes up. Cross-price elasticity would also be affected because substitutability declines, but the description here centers on how the brand’s own price changes affect its quantity demanded.

Loyalty to a brand reduces how easily customers switch when prices move, so demand becomes less sensitive to the brand’s own price. This lowers the price elasticity of demand, making it more inelastic—customers stick with the brand even if the price goes up. Cross-price elasticity would also be affected because substitutability declines, but the description here centers on how the brand’s own price changes affect its quantity demanded.