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Impact on Revenues

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Several years ago the National Association of Broadcasters imposed restrictions on the amount of nonprogram material that could be aired during children's tv shows, effectively reducing the quantity of advertising allowed during children's viewing hours by 33 percent. Within four months, the price of a minute of advertising on network tv increased by roughly 14 percent. What's the impact of this on the revenues of the networks and why?

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The solution calculates the impact on revenues for the scenario given below.

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The quantity of advertising declined by 33 percent while the price increased by 14 percent. Thus ...

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