5. After expanding expenditures on its 'blind taste test' ad campaign from $10 million to $15 million per month, 7up Inc. observes that sales quantity last month fell from 120 million bottles to 110 million bottles. What is the advertising elasticity of demand? a. ገA b. What can you say from this elasticity about their current advertising campaign?

5. After expanding expenditures on its 'blind taste test' ad campaign from $10 million to $15 million per month, 7up Inc. observes that sales quantity last month fell from 120 million bottles to 110 million bottles. What is the advertising elasticity of demand? a. ገA b. What can you say from this elasticity about their current advertising campaign?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter3: Demand Analysis

Section: Chapter Questions

Problem 7E: In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price...

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In an attempt to increase revenues and profits, a firm is considering a 4 percent increase in price and an 11 percent increase in advertising. If the price elasticity of demand is 1.5 and the advertising elasticity of demand is +0.6, would you expect an increase or decrease in total revenues?
When a walk-in clinic spent $5,000 a year on newspaper advertising, it saw 5,000 patients a year. When it increased its annual advertising expenditure to $7,500 per year, it saw 10,000 patients a yeara. What is the change in advertising expenditures?b.What is the change in patient visits?c. What is the advertising elasticity of demand?d. Do you think the increase in advertising expenditures was worthwhile and why?
Snooki, a new marketing intern, was a little scatterbrained during the first meeting with her manager, when she made four statements about pricing. Which one of her four statements about pricing was correct? a. A product with an elastic demand is likely to face little competition. b. An EDLP retailer offers many price promotions. c. A product with an elasticity of demand of -0.7 will enjoy increases in revenue when prices are cut. d. Cost-plus pricing is not the perfect pricing strategy because the pricing method ignores customers’ willingness to pay and competitors’ pricing strategy.
26) Larry's Carpet Cleaners can influence demand by advertising. Larry charges $50 per carpet, and he cleans 150 carpets per month. The price elasticity of demand is -4, and Larry spends $500 per month on advertising. If Larry is maximizing profits, calculate the advertising elasticity of demand.
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4. The elasticity of demand for a firm's product is -5 and its advertising elasticity of demand is 0.26. Determine the firm's optimal advertising-to-sales ratio. If the firm's revenues are 500,000, what is its profit-maximizing level of advertising?
MIcro: The company “Mike Broonie” operates in the market of monopolistic competition. Just now, the company weekly produces and sells 100 units of pillows for £12 each. The average total cost to produce the pillows doesn’t depend on the output, being £10 per unit. Having evaluated the price elasticity of demand for its product, the company concluded that demand is inelastic at the moment. a. What indicator characterizes the price elasticity of demand? What formula (or formulas) one can use to calculate this indicator? Choose any number for this indicator that, under the conditions specified in the case, could characterize the price elasticity of demand for the company “Mike Broonie”. b. Imagine that the owner of the company wants to increase the price of the company’s product. How will it affect sales, revenue, and profit (will each of these indicators increase, decrease, or remain the same)? Give here theoretically substantiated forecast. To increase the number of points…
a. Following your review of elasticity, will the elasticity of demand for Nissansedans increase, decrease, or remain the same when each of the followingevents occurs? Explain your answer. i. Other car manufacturers, such as Honda, decide to make and sellsedans. ii. Sedans produced in foreign countries are banned from the Europeanmarket. iii. Following increased advertisements, Americans believe that sedans areless safe than ordinary passenger cars. iv. In the long run, new sedan models are produced.
6. Elasticity and total revenue I The following graph shows the daily demand curve for bippitybops in Halifax. Use the green rectangle (triangle symbols) to compute total revenue at various prices along the demand curve. Note: You will not be scored on any changes made to this graph. 300 275 250 Total Revenue 225 200 175 + 150 125 100 75 50 25 Demand 3 6. 12 15 18 21 24 27 30 33 36 QUANTITY (Bippitybops per day) PRICE (Dollars per bippitybop)
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