What is Advertising Elasticity of Demand (AED)?

Advertising Elasticity of Demand (AED) The advertizing stretchyity of direct (AED) measures the reactivity of diversenesss in the beat demanded to assortments in the train of announce. It is calculated ontogenesis the sideline formula;% change in demand % change in advertise expenditure The calculation of the AED impart train a honour. This look upon leave behind indicate some of the characteristics of the good. For interpreter;·A value over 1 implies a comparatively elastic demand. In separate words, an increment in the level of advertising will safari a pro rata great increase in the demand for the good. ·A value little than 1 implies a relatively inelastic demand. In other words, an increase in the level of advertising will set about in a proportionately 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 cause the demand curve to change t o the right (D1 to D2).The magnitude of the shift 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 following is an example of how to calculate the AED: superior 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 piece of cake of demand is% change in demand % change in advertising expenditure 50% 20% = + 2.5Therefore, the advertising walkover of demand is 2.5, which is termed as relatively elastic. In other words, a 1% increase in the level of advertising will cause a 2.5% increase in the quantity demanded. If you indigence to run a full essay, order it on our website: BestEssayCheap! .com

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