Question

Purell announced that the new chemical formula for its hand sanitizer was so effective that "just 1 squirt of Purell Advanced Hand Sanitizer kills as many germs as two squirts of any other national brand." If Purell succeeds in convincing consumers that its claim is correct, would its demand curve become more elastic or less elastic? Briefly explain.

Short answer

If Purell convinces consumers their hand sanitizer is more effective, the demand would become less elastic. This is because the increased perceived effectiveness lessens consumers' price sensitivity.

Step-by-step solution

Understand the scenario

Purell announces that their hand sanitizer is twice as effective as any other national brand. If consumers believe this claim, it implies that they might perceive the value of Purell's product to be higher. As such, demand for this product might change.

Apply the principles of elasticity

When consumers perceive a product as more effective or valuable, they may become less sensitive to changes in its price. This is because they believe they are getting more value or effectiveness per unit of the product. So, any changes in the price of Purell's product would not significantly affect the quantity demanded of it by consumers. That's a characteristic of an inelastic demand.

Conclusion

So, convincing consumers that Purell's product is more effective at killing germs could make its demand curve less elastic. This is because an increase in perceived value or effectiveness can lessen the sensitivity of consumers to price changes.

Key concepts

Consumer Perception

Understanding consumer perception is crucial when it comes to evaluating how a product is viewed by customers and how this view affects their purchasing decisions. In marketing, perception refers to the process by which consumers select, organize, and interpret information to form a meaningful picture of a product. For instance, if Purell hand sanitizer is marketed as significantly more effective than competitors, this can alter consumer perception in its favor.

When consumers believe in the superiority of Purell's product, as stated in their announcement, they attribute a higher value to it. This often translates to consumers being willing to pay a higher price or maintain their consumption despite a price increase. The outcome is a demand that is less responsive to price changes, which in the context of economic theory, is referred to as inelastic demand. In practice, this means that Purell can potentially raise prices without losing a proportionate amount of customers, as they perceive Purell's value to be higher relative to other brands.

Demand Curve

The demand curve is a graphical representation showing the relationship between the price of a product and the quantity of the product that consumers are willing to purchase. Typically, the curve slopes downwards from left to right, indicating that as the price decreases, the quantity demanded increases, and vice versa.

An external event, such as Purell's claim of a new, more effective formula, can shift consumer preferences and alter the shape of the demand curve. If the claim convinces consumers, the demand curve for Purell could become steeper. This is because with the perception of increased effectiveness, each unit of Purell is valued more, and consequently, changes in price would have a smaller effect on the quantity demanded. The demand curve thus becomes less elastic, reflecting that consumers are less likely to reduce their quantity demanded in response to price increases.

Product Effectiveness

Product effectiveness refers to how well a product achieves its intended purpose. In the case of Purell hand sanitizer, effectiveness is measured by its ability to kill germs. The claim that