Question
1.Advertising is an extent decision. The profit maximizing advertising-to-sales ratio can be given by A/R = E Q.A / E Q.P where E Q.A advertising
1.Advertising is an extent decision. The profit maximizing advertising-to-sales ratio can be given by A/R = EQ.A/ EQ.Pwhere EQ.Aadvertising elasticity of demand for the firm's product and EQ.Pis the price elasticity of demand for the firms product. A is advertising $ and sales R=PQ.
a. Suppose the firm's margin is 50% and for each 10% change in advertising expenditure, the firm sells 10% more products. What is the optimal advertising to sales ratio?
b. If demand is sensitive to advertising, should the firm increase its advertising to sales ratio?
c. If the firm is in a competitive market with low margins, should it increase its advertising to sales ratio?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Austro-corporatism Past, Present, Future
Authors: Gunter Bischof
1st Edition
1000675858, 9781000675856
