Companies like SDG & E are the Monopolists in the market, as they are the only suppliers of Electricity and Gas in San Diego. They control quantity and price all by themselves by, changing the price and quality of the product according to their benefit. They might sell more quantities charging low price for the product in a highly elastic market and sell less quantities charging high price in a less elastic market. Due to a dominant control over the whole market they don’t have competitors, but still their demand can be limited having a negative sloping inelastic demand curve.
It happens because of the Government intervention in order to protect the costumers from high and unjust prices. So as to avoid Government intervention and for greater Marginal Revenue companies like, SDG & E advertise moderately, to create arousal in the customers. To advertise effectively, they also may offer promotional packages so that consumption increases alternatively, the consumers might be given incentives by rewarding them for carefully using electricity and gas. This makes good public relations because For monopoly firm, the creation of goodwill through intensive practice of CSR is very important which can most effectively be done through advertising.
It is concluded that, in every type of competition advertising is a very important factor as to , lead the market successfully by maintaining Marginal Revenue and Marginal Cost.
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