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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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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.

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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 ...

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  • Bachelor of Science in Business Administration, University of the Philippines
  • Master in Business Administration, Saint Mary's University
  • Doctor of Philosophy in Education, University of the Philippines
  • Doctor in Business Adminstration (IP), Polytechnic University of the Philippines
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