Suppose that the advertising elasticity of the demand for an entertainment channel is 1.3. If the producer raises advertising expenditure by 5%, how would that affect the demand?
A) Increase by 5%.
B) Increase by 1.3%.
C) Increase by 6.5%.
D) None of the above.

Question

Quizplus · Accepted Answer

The advertising elasticity of demand is 1.3, which means for every 1% increase in advertising expenditure, demand increases by 1.3%. Therefore, a 5% increase in advertising expenditure would increase demand by 5% * 1.3 = 6.5%.

Suppose That the Advertising Elasticity of the Demand for an Entertainment