When Proctor and Gamble evaluates price increases for its Tide brand of laundry soap, it takes into account the amount of brand loyalty for the product and how much a consumer would be willing to switch to a new brand when noticing the price has increased. This analysis is an example of how price elasticity is influenced by the ___________ effect.

The substitution effect is the decrease in sales for a product or service that can be attributed to consumers opting for cheaper alternatives when its price rises.

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HildredAdebayo HildredAdebayo · Answer 2 · 2020-04-15T07:49:41+02:00

Answer:

Value/ Satisfaction effect.

Explanation:

VALUE/ SATISFACTION:

Customers make their decision to purchase products based on certain factors such as the value, price, accessibility and so on of the product. The amount of satisfaction gotten by a customer, has the potential to take a customer from being a first time customer to being a recurrent customer, indicating a loyalty status to the product.

Increased value for a product, despite a considerable change in price, could maintain the sales within a range not too far from the sales range with the previous price it was sold for.

Customer satisfaction is therefore, a very important aspect of business which has the power to influence sales in a company, particularly when there is a change in price.