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    P&G doubled advertising for one of their brands

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    P&G doubled advertising for one of their brands and realized a sales increase from $2,000,000 to $2,500,000 in that period of time. What is the advertising elasticity for that brand?

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    Please refer to the attached file for the response.

    Elasticity is an economic concept that indicates responsiveness. As applied to price elasticity of demand it is the responsiveness of demand to a given change in price. It then measures how consumers' demand was affected by the decision of the seller to change the price. It is expressed in coefficient of elasticity which is computed using the formula:
    e = % change in quantity demanded/% change in price
    According to Pyndick and Rubinfeld (2005), elasticity measures the sensitivity of ...

    Solution Summary

    This solution provides a detailed, step-by-step explanation of how to determine the advertising elasticity for a brand in the given accounting problem.