Question
Suppose that the demand for a new soft drink is given by a nonlinear demand function: Q(P, A) = P /A/, where P is the
Suppose that the demand for a new soft drink is given by a nonlinear demand function: Q(P, A) = P /A/, where P is the product price and A is the amount of advertising. a) What is the price elasticity of demand? What is the advertising elasticity of demand? b) What do you predict the advertising-to-sale ratio would be in this industry? Does it depend on how costly it is to advertise for this product?
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Microeconomics
Authors: Robert Pindyck, Daniel Rubinfeld
8th edition
978-0132870436, 132870436, 013285712X, 978-0133371178, 133371174, 978-0132857123
