You are the manager of a popular hat company.You know that the advertising elasticity of demand for your product is 0.25.How much will you have to increase advertising in order to increase demand by 5%?
A)0.05%.
B)20%.
C)25%.
D)1.25%.

Question

Quizplus · Accepted Answer

Advertising elasticity of demand is the percentage change in demand resulting from a 1% change in advertising. To find the required increase in advertising, divide the desired percentage increase in demand (5%) by the advertising elasticity (0.25): 5% / 0.25 = 20%.

You Are the Manager of a Popular Hat Company