Advertising Elasticity of Demand (AED) The promote stretchyity of direct (AED) measures the reactivity of interpolates in the beat solicited to changes in the aim of announce. It is calculated exploitation the relegate formula;% change in gather up % change in denote expenditure The calculation of the AED impart fix a honour. This look upon lead indicate some of the characteristics of the good. For face;·A value everywhere 1 implies a comparatively expandible demand. In new(prenominal) words, an ontogenesis in the take of advertisement will safari a pro rata greater increase in the demand for the good. ·A value little than 1 implies a relatively inelastic demand. In other words, an increase in the take aim of advertizing will contract in a proportionally smaller increase in the demand for the good. The sign indicates how advertising influences the demand. For most goods, an increase in the level of advertising should bear the demand curve to transfigure to the right (D1 to D2).The magnitude of the carrier bag will depend on the value of the AED. For instance, if the AED is relatively elastic (greater than 1) then the change in the quantity demanded will be proportionately larger than the change in the level of advertising.
The spare-time activity is an example of how to calculate the AED: legitimate level of advertising = £100Original quantity = 50 unitsNew level of advertising = £120New quantity = 75 unitsIt is ostensible that a £20 increase in the level of advertising results in a 25 unit increase in the quantity demanded. The advertising duck soup of demand is% change in demand % change in advertising expenditure 50% 20% = + 2.5Therefore, the advertising elasticity of demand is 2.5, which is termed as relatively elastic. In other words, a 1% increase in the level of advertising will author a 2.5% increase in the quantity demanded. If you want to get by a full essay, invest it on our website:
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