Posted by mark on .
aztec enterprises depends heavily on advertising to sell its products. management at aztec is allowed to spend $2million monthly on advertising, but no more than this amount. each month, aztec spends exactly $2million on advertising. what is aztec's elasticity of demand for advertising? can you write the equation for aztec's demand for advertising?
Assuming aztec will always spend $2million, no more no less, The PRICE elasticity of demand would be -1.
P*Q = 2million
Budweiser, Miller and Coors, who together produce 80% of all beer consumed in the US, each spend well over $500 million a year on television advertising campaigns, promoting their beer brands. Do you think these firms would welcome congressional legislation which restricted the amount that any one firm could spend on advertising to $5 million yearly, and thereby allowed them all to reduce their costs dramatically without fear of losing ground to each other? Explain your answer