If, after conducting market research, a firm estimates that its advertising elasticity of demand is 0.3 and the price elasticity of demand is -3.4, then for a firm with annual sales of $125,000, the rule of thumb for advertising recommends that

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    approximately $11,000 be spent on advertising annually.
     $12,500, or 10% of total sales, be spent on advertising annually.
     approximately 8.8% of annual sales should be spent on advertising annually.
     Both 1 and 3.
asked Jun 2, 2013 in Economics by anonymous
    

1 Answer

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Both 1 and 3.
answered Jun 3, 2013 by Xyz ~Expert~ (3,650 points)

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