(Related to the Apply the Concept on page 512) Why was De Beers worried that people might resell their old diamonds? How did De Beers attempt to convince consumers that previously owned diamonds were not good substitutes for new diamonds? How did De Beers's strategy affect the demand curve for new diamonds? How did De Beers's strategy affect its profit?

When it comes to the resale market for diamonds, it's crucial to understand its potential impact on major producers like De Beers. A thriving resale market could mean consumers purchase pre-owned diamonds instead of new ones, increasing the availability and decreasing the exclusivity of these gems. De Beers, historically, has been concerned about this because it directly affects their ability to control the market supply and diamond prices.

In response, De Beers strategically devalued the notion of buying second-hand diamonds by promoting the idea that each new diamond is unique and embodies a special connection between the giver and receiver. By underscoring the sentimental value and symbolic nature of diamonds, they effectively diminished the appeal of the resale market, maintaining the allure and demand for newly mined diamonds.

The demand curve in economics shows the relationship between price and quantity demanded of a good. De Beers’ marketing campaigns influenced the position of the demand curve for new diamonds by altering consumer perception.

By convincing buyers that new diamonds are vastly superior to previously owned ones, De Beers successfully shifted the demand curve to the right. This means at any given price level, more new diamonds were demanded than before, reaffirming De Beers' dominance in the industry. The rightward shift in the demand curve also illustrates a decrease in price elasticity for new diamonds, as consumers would be willing to pay higher prices under the belief that there are no close substitutes.

Branding is exceptionally powerful in the world of luxury goods. It turns ordinary products into symbols of status and desire. De Beers' branding efforts focused on instilling the notion that diamonds are not just luxury items, but the ultimate symbols of love and commitment.

Through slogans like 'A Diamond is Forever,' they created a brand story that resonated with deep emotional values, making the purchase of new diamonds an almost irreplaceable act. This form of branding goes beyond the physical attributes of the product and taps into the consumer's psyche, creating an association that's difficult for competitors to challenge and for the resale market to disrupt.

The principles of supply and demand are at the heart of the diamond industry's dynamics. De Beers' strategy affected these foundational economics by manipulating consumer demand. By successfully branding new diamonds as unique and irreplaceable, they curbed the growth of the diamond resale market and retained control over the supply of diamonds.

The impact on supply and demand goes beyond mere branding; it reshapes the entire market structure and positions a company like De Beers to maintain pricing power and market share. High demand for its product combined with the managed supply meant De Beers could maximize profits while preventing the typical market forces from driving prices down, demonstrating the power of marketing in influencing core economic principles.