Suppose the advertisement expenditure of an organisation increases from Rs 25,000 to Rs 60,000. Consequently, the demand of the organisation’s products increases from 40,000 units to 70,000 units. Calculate the advertisement elasticity of demand.

Problem: Suppose the advertisement expenditure of an organisation increases from Rs 25,000 to Rs 60,000. Consequently, the demand of the organisation’s products increases from 40,000 units to 70,000 units. Calculate the advertisement elasticity of demand.

Solution

Homework answer

The advertisement elasticity of demand ranges from eA = 0 and eA = ∞