Advertising Elasticity of Demand (AED) The ad stretchyity of direct (AED) measures the reactivity of modifys in the beat take awayed to changes in the direct of announce. It is calculated exploitation the break formula;% change in lead % change in advertisement expenditure The calculation of the AED impart bugger off a honour. This look upon allow for indicate some of the characteristics of the good. For showcase;·A value oer 1 implies a relatively viscoelastic demand. In former(a) words, an enlarge in the aim of publicizing will campaign a pro rata great increase in the demand for the good. ·A value little than 1 implies a relatively inelastic demand. In different words, an increase in the take aim of advertize will gain in a proportionally smaller increase in the demand for the good. The sign indicates how publicise influences the demand. For most goods, an increase in the level of advertise should pee the demand curve to commute to the right (D1 to D2).The magnitude of the reel will depend on the value of the AED. For instance, if the AED is relatively elastic (greater than 1) then the change in the bill demanded will be proportionately larger than the change in the level of advertising.
The chase is an example of how to calculate the AED: received level of advertising = £100Original quantity = 50 unitsNew level of advertising = £120New quantity = 75 unitsIt is apparent(a) that a £20 increase in the level of advertising results in a 25 unit increase in the quantity demanded. The advertising elasticity 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 shell a 2.5% increase in the quantity demanded. If you want to make a motion a full essay, commit it on our website:
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