PROMOTIONAL ELASTICITY OF DEMANDS
Presented byBharat Kumar Sahoo
Advertisement-Expenses for increase sale
Degree of responsiveness of quantity demand (sales) to
change in advertisement expenditure
Mathematically,
2 cases
eA>1 & eA<1
Change in Q due to change in A
2009-10
2010-11
0
5000000
10000000
15000000
20000000
25000000
30000000
35000000Adv cost
2009-10
2010-11
0
100000
200000
300000
400000
500000
600000
700000Qty change
CalculationQ=400000A=20000000Q1=650000A1=30000000
AED=Δq/Δa × a/q 250000/10000000 × 20000000/400000
=1.25
eA>1,so producer should go for a heavy advt. expenditures
CalculationQ=400000A=20000000Q1=750000A1=40000000
AED=Δq/Δa × a/q 350000/20000000 × 20000000/400000
=0.87
EA<1,so producer shouldn’t go for a heavy advt. expenditures
conclusionSo we can conclude that advertisement puts a great effect on quantity demand. It plays a crucial role in decision making regarding the expenses of a company towards advertisements.