Assuming that ad spending shifts of $60 for every $1,000 in customer wealth transition, elasticity is, Elasticity of demand= % change in quantity demanded/% change in price
60/1000=6%
When stock market value increases by $40 billion, ad spending will then rise by;
% change in price* Elasticity of demand= % change in quantity demanded= 400 billion* 6/100= 24 billion.The degree of sensitivity of one economic component to another determines the degree of elasticity. Elasticity in the context of business refers to the degree to which consumers, clients, or distributors modify the demand (or quantity) created as a result of changes in price or profit.Ad spending fluctuates by $60 for every $1,000 in changes in customer wealth, therefore the elasticity is 6%.
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