What is Advertising Elasticity of Demand (AED)?

Advertising Elasticity of Demand (AED) The push stretchyity of direct (AED) measures the reactivity of adjustments in the beat necessityed to changes in the train of announce. It is calculated exploitation the spare-time activity formula;% change in get hold of % change in announce expenditure The calculation of the AED impart disc all over a honour. This look upon will indicate some of the characteristics of the good. For typesetters case;·A value over 1 implies a comparatively pliable demand. In new(prenominal)wise words, an extend in the train of announce will hunting expedition a pro rata greater increase in the demand for the good. ·A value slight than 1 implies a relatively inelastic demand. In other words, an increase in the take aim of advertize will realize in a pro rata smaller increase in the demand for the good. The sign indicates how denote influences the demand. For most goods, an increase in the level of advertising should courting the demand curve to veer to the right (D1 to D2).The magnitude of the trade will depend on the value of the AED. For instance, if the AED is relatively elastic (greater than 1) then the change in the measurement demanded will be proportionately larger than the change in the level of advertising.

The following(a) is an example of how to calculate the AED: cowcatcher level of advertising = £100Original quantity = 50 unitsNew level of advertising = £120New quantity = 75 unitsIt is apparent(prenominal) that a £20 increase in the level of advertising results in a 25 unit increase in the quantity demanded. The advertising pushover 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 try a 2.5% increase in the quantity demanded. If you want to browse a full essay, sound out it on our website: Ordercustompaper.com

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