Advertising Elasticity

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Definition: Advertising Elasticity

Advertising serves the purpose of generating new sales through promotion. Advertising elasticity is the measure of the effectiveness of advertising on a market.

AED measures the percentage change in the quantity of goods demanded to the percentage change in advertising spending.

Advertising elasticity can be both positive and negative. A positive advertising elasticity accounts for an increase in demand with the increase in advertising and vice-versa for negative advertising elasticity. Advertising elasticity is usually positive.

The impact varies from industry to industry. For example, the impact of an offer regarding a discount offer at a pizza outlet may be drastically high but the same may not be true for an offer at a jewellery store.

A lot of factors usually accounts for the increase in demand e.g the state of the economy during that period, the current trends etc. Hence advertising elasticity may always not be the right way of measuring the effect of advertising in a particular period.

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