Question

You are the manager of a popular hat company. You know that the advertising elasticity of demand for your product is 0.25. How much will you have to increase advertising in order to increase demand by 5 percent?

Answer 1

Answer:

20%

Explanation:

if the advertising elasticity = 0.25 and you want to increase the quantity demanded by 5%, you will need to increase advertisement by = 5 / 0.25 = 20%

The advertising elasticity measures how much does a change in advertising changes the quantity demanded of a product or service.