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![&ed Mc is M C ed Magin a P cast & ed M C ed t P MC ed ed + Mc ed-ed = 1 MC P Ed P 1 Cp - M. C ed pinast second in wea Wse whi](//img.homeworklib.com/images/e33478c2-ef4e-4a19-b3e3-de9b67b33d4a.png?x-oss-process=image/resize,w_560)
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Two aspects of this result:
1. More elastic the demand curve, the lower will be advertising
to sales ratio. For the extreme case where ed is infinite we can
verify that A/R will be close to 0.
2. Greater the advertising elasticity, higher will be A/R ratio.
That is, firms will spend more on advertising relative to
Sales.
The objective tmctron the model is TCeAeCA, P- [aG) A fime maximi3e peafit Cumetin e(PA2 uartity uhih is Th ot s rofito P & A are ametin f4 P Pice. REP,A) A Renl of advertising. conditions tinst rder are - 2. The 1 P+ P a c 2a P uwi manipulate abone expaesson it in tuma elastici tyo dem baing le Q P P ed MC ed
&ed Mc is M C ed Magin a P cast & ed M C ed t P MC ed ed + Mc ed-ed = 1 MC P Ed P 1 Cp - M. C ed pinast second in wea Wse which is er dez Conditien A 2c 20-1 0 A
1/20 Cest CM Manginal |*Ne wil convert it inte dif eret a boenn ohere which is elastia ty Neaput to Advetsing reA ide introdue eA we Out put uith A MC./a 2 A A Q P.Q A 1-+ MC. eA. A total ravenue Call P R I MC. KA R P X eA. R eA P- Mc P A MC ReA R P T colro
Uaing O, ne kmow P- MC や2. n Sutstitute t CA A ed) A R. eA Pxa) ed whe A s A dueutising Aperding, Ri Reueue ea+ larti aty t demand with iespet to ddwectisng ed- euce elasticty o demand 313 T I