192.249.47.211: /* Strength */

2014-02-14T16:29:08Z

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	'''Advertising elasticity of demand''' (or simply '''advertising elasticity''', often shortened to '''AED''') is an [[elasticity (economics)\|elasticity]] measuring the effect of an increase or decrease in advertising on a market.<ref name=PindyckRubinfeldPage405to407>Pindyck; Rubinfeld (2001). pp.405-407.</ref><ref name~~="Png66"/> Although traditionally considered as being positively related, demand for the good that~~ is ~~subject of the advertising campaign can be inversely related to the amount spent if the advertising is negative.~~		My name is Enid from Kanerkinden doing my final year engineering in Greek and Roman Culture. I did my schooling, secured 73% and hope to find someone with same interests in Microscopy.<br><br>my website - [http://snakzstock.com/dressup4ever/profile/954401/MoJVL.html Biking for modern life mountain bike sizing.]

	~~== Definition ==~~
	~~Good advertising will result~~ in a positive shift in [[demand]] for a good. AED is used to measure the effectiveness of this strategy in increasing demand versus its cost.<ref name="Curran"/> Mathematically, then, AED measures the percentage change in the quantity of a good demanded induced by a given percentage change in spending on advertising in that sector:<ref name="Curran">Curran (1999). pp.182-183.~~</ref>~~
	~~:<math>AED = \frac{\%\ \mbox{change in quantity demanded}}{\%\ \mbox{change in spending on advertising}} = \frac{\Delta Q_d/Q_d}{\Delta A/A} </math>~~

	~~In other words~~, ~~the percentage by which sales will increase after a 1~~% increase in advertising expenditure assuming all other factors remain equal (''[[ceteris paribus]]'').<ref name="Png66"/> AED is usually positive.<ref name="Curran"/> Negative advertising may, however, result in a negative AED.

	~~==Applications==~~
	~~AED can be used~~ to ~~make sure advertising expenses are in line, though an increase in demand may not be the only desired outcome of advertising.<ref name="Curran"/> The rule of thumb combines the AED~~ with ~~a known [[price elasticity of demand]] (PED) for the~~ same ~~good~~. ~~The optimal relationship is denoted by:~~<~~ref name=PindyckRubinfeldPage405to407/~~>
	:<~~math~~>~~\frac{\mbox{Advertising expenditure}}{\mbox{Sales revenue}} = -\frac{AED}{PED}\mbox{ or, symbolically, }\frac{A}{P.Q} =~~ -~~\frac{E_A}{E_P}</math>~~

	In words, "to maximize profit, the firm's advertising to sales ratio should be equal to minus the ratio of the advertising and price elasticities of demand."<ref name=PindyckRubinfeldPage405to407/> As noted by Pindyck and Rubinfeld, firms should advertise heavily if their AED is high (they get a lot of bang for their advertising buck) or if their PED is low (since for every added sale there is significant profit).<ref name=PindyckRubinfeldPage405to407/>

	Thus, a comparison of PED and AED can also be used to determine whether more advertising is the correct strategy to maximise profits (e.g. for [[H. J. Heinz Company\|Heinz]] in the market for [[baked beans]]), or changing prices (as with supermarket own brands).<ref name="Curran"/>

	~~==Examples==~~
	~~The following are for industry-wide AEDs, researched in the [~~[~~United States]]:<ref name="Png66">Png (2007). p.65-66.</ref>~~
	* Beer: 0.0
	* Wine: 0.08
	* Cigarettes: 0.04
	* Recreation: 0.08
	The elasticity figures are surprisingly low. Both the beer and cigarette industries advertised heavily. The answer is that the coefficients are for industry-wide demand not firm demand; the AED for individual brands would be substantially higher.<ref name="Png66"/>

	~~== Notes ==~~
	~~{{Reflist}}~~

	~~==References==~~
	~~{{Refbegin}}~~

	* {{cite book\|last=Curran\|first=John\|title=Taking the fear out of economics\|url=http://~~books~~.~~google.co.uk~~/~~books?id=iBFNU2eOPRIC\|accessdate=16 February 2010\|date=December 1999\|publisher=Cengage Learning EMEA\|isbn=978-1-86152-474-4}}~~
	* {{Cite book\|last1=Png\|first1=Ivan\|last2=Lehman\|first2=Dale\|edition=3rd\|year=2007\|title=Managerial Economics\|publisher=Blackwell\|url=http://~~books~~.~~google.co~~.~~uk/books?id=JM6sNd1a5XsC \| isbn=978-1-4051-6047-6}}~~
	* {{Cite book\|last1=Pindyck\|last2=Rubinfeld\|title=Microeconomics\|edition=5th\|publisher=Prentice-Hall\|year=2001}}
	~~{{Refend}}~~

	~~[[Category:Elasticity (economics)]]~~
	~~[[Category:Consumer theory]]~~
	~~[[Category:Advertising]]~~
	~~[[Category:Demand]~~]

en>Andy Dingley: Reverted 1 edit by 84.64.14.92 (talk): Rv content-free spammy EL. (TW)

2014-01-18T11:36:21Z

Reverted 1 edit by 84.64.14.92 (talk): Rv content-free spammy EL. (TW)

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en>Suprcel: Disambiguated: class → class (philosophy)

2012-08-03T15:49:28Z

Disambiguated: class → class (philosophy)

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Threaded rod - Revision history

192.249.47.211: /* Strength */

en>Andy Dingley: Reverted 1 edit by 84.64.14.92 (talk): Rv content-free spammy EL. (TW)

en>Suprcel: Disambiguated: class → class (philosophy)