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    Question

    If customers perceive no difference between competing

    banks, price elasticity becomes:
    A Low Correct Answer Incorrect Answer
    B Zero Correct Answer Incorrect Answer
    C High Correct Answer Incorrect Answer
    D Negative Correct Answer Incorrect Answer
    E Irrelevant Correct Answer Incorrect Answer

    Solution

    When differentiation is low, customers are more sensitive to price changes. Why others are incorrect: Low elasticity occurs when strong differentiation exists; Zero and negative unrealistic here; Irrelevant incorrect. Banking Example: Switching banks for slightly higher savings rate.

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