Dunhill Ltd. depends heavily on advertising and publicity to sell its products. Management at Dunhill is...
Dunhill Ltd. depends heavily on advertising and publicity to sell its products. Management at Dunhill is allowed to spend $4 million monthly on advertising & publicity, but no more than this amount. Each month, Dunhill spends exactly $4 million on advertising. What is Dunhill’s elasticity of demand for advertising and publicity? Can you write the equation for Dunhill’s demand for advertising and publicity?
Homework Answers
It can actually be mentioned elasticity of advertising is nothing but the percentage changing sales divided by the percentage change in advertising budget and because it is 4 million every year without considering the percentage change in sales the denominator is zero which means the elasticity would be infinity and therefore it can be mentioned that the elasticity of advertising and publicity would be perfectly elastic in nature
Therefore demand equation would be independent of quantity
P= $4 million is the demand equation and its answer to this question
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