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 percent?
A) 0.05 percent
B) 20 percent
C) 25 percent
D) 1.25 percent

Question

Quizplus · Accepted Answer

The advertising elasticity of demand is defined as the percentage change in demand divided by the percentage change in advertising. Given an elasticity of 0.25 and a desired increase in demand of 5 percent, you solve for the required change in advertising: 5% / 0.25 = 20%.

You Are the Manager of a Popular Hat Company