A local coffee shop operates in a monopolistically competitive market. It offers various specialty drinks that are slightly different from those offered by nearby cafes. Recently, the shop has increased its prices due to higher ingredient costs. If the price increase leads to a decrease in the quantity demanded but not a complete loss of customers, which of the following best explains this situation in terms of monopolistic competition principles?

In a monopolistically competitive market, businesses offer products that are similar but not identical, allowing them to have some control over their prices. When the coffee shop raised its prices, customers still found value in its unique specialty drinks, which kept some of them coming back despite the higher cost. This situation illustrates that while higher prices can reduce the quantity demanded, the shop's distinct offerings create brand loyalty that helps retain some customers. For example, if a customer loves the shop's special caramel macchiato and it becomes more expensive, they might still choose to buy it occasionally instead of switching to a nearby café. Therefore, the coffee shop's ability to differentiate its products helps it maintain some level of demand even after a price increase.