S

Advertising Elasticity Of

Demand :

ABM – 102

Seminar & Group Discussion

Submitted By : T.Guru Aarat

142063

What is Elasticity of demand ?

S Elasticity of demand refers to the degree of

responsiveness of demand of a commodity to change in

any of its determinants.

S Its is a measure of how sensitive the quantity demanded

of a commodity is to change in any of the factors

influencing demand.

Types Of elasticity of demand :

S There are 4 types of elasticity of demand :

1. Price Elasticity of Demand

2. Cross Elasticity of Demand

3. Income Elasticity of Demand

4. Advertising Elasticity of Demand

Advertising Elasticity of

Demand (AED) :

S Advertising Elasticity of demand refers to the proportionate

change in demand of a commodity due to proportionate

change in advertising expense.

S Advertising elasticity is a measure of an advertising

campaigns effectiveness in generating sales.

S Formula :

Proportionate change in Demand for

product

Proportionate change in Advertising

expense

AED =

Types Of AED:

S Perfectly Elastic Advertising elasticity

S Perfectly Inelastic Advertising Elasticity

S Highly Elastic Advertising Elasticity

S Unitary Elastic Advertising Elasticity

S Highly Inelastic Advertising Elastcity

Perfectly elastic AED

y

0 x

Perfectly elastic

curve

D D

When the

demand for a

product

changes –

increases or

decreases

even when

there is no

change in

advertising

expense.

Advertising

Expense

demand

Perfectly inelastic AED:

demand

D

D

Perfectly inelastic

curve

0

Y

X

When a change in

advertising

expense , doesn’t

lead to any

change in quantity

demanded , it is

known as perfectly

inelastic demand.

Advertising

Expense

Relatively elastic AED:

Relatively elastic

curveAdvertising

Expense

demand0 x

y

D

D

When the

proportionate

change in

demand is

more than the

proportionate

changes in

advertising

expense , it is

known as

relatively

elastic

demand

Unitary elastic AED:

Unitary AED

y

x0 demand

D

D

When the

proportionate

change in

demand is

equal to

proportionate

changes in

advertising

expense price,

it is known as

unitary elastic

demand.

Advertising

Expense

Relatively inelastic AED:

Relatively inelastic

demand curve

XO

Y

demand

D

D

When the

proportionate

change in

demand is less

than the

proportionate

changes in

advertising

expense , it is

known as

relatively inelastic

demand

Advertising

Expense

1.Nature of the products and time factor

2.Timing of the promotional activities

3.Product stage

4.Promotional activities of the competitors

5.Volume of advertising expense incurred

6.Non Advertising factors

Factors affecting AED :

Importance of AED:

• Its helps the management in deciding whether the

outlay on advertisement should be increased ,

decreased or maintained at the present level.

• Its helps the management in studying the effect of

advertisements on sales revenue.

• Advertising elasticity also helps in evaluating the

effectiveness of various media of advertisement.

THANK

YOU !!