Advertisement elasticity is a measure of the responsiveness of the quantity demanded of a particular good to a change in advertising, ceteris paribus.

Advertising elasticity is a measure of the impact of advertising on the quantity demanded of a product. Like price elasticity, it measures the degree of responsiveness of the quantity demanded of a good to a change in its advertising while holding all other factors (such as price, income, and tastes) constant. A key difference is that advertising elasticity typically measures how responsive the quantity demanded is to a percentage change in advertising expenditure rather than a percentage change in the price of the good.

The formula for calculating advertising elasticity (E_a) is as follows: E_a = \frac{Percentage \space change \space in \space QD}{Percentage \space change \space in \space advertising} To find the percentage change in quantity demanded (QD) and advertising, we need the initial quantity demanded (QD) and advertising expenditure (A_e), as well as the new quantity demanded (QD_n) and new advertising expenditure (A_e_n). The formulas for calculating these percentage changes are: Percentage \space change \space in \space QD = \frac{QD_n - QD}{QD} Percentage \space change \space in \space advertising = \frac{A_e_n - A_e}{A_e} Then we can calculate the advertising elasticity by dividing these two percentage changes: E_a = \frac{\frac{QD_n - QD}{QD}}{\frac{A_e_n - A_e}{A_e}}

Let's use a hypothetical example to calculate advertising elasticity. Suppose a company sells 1000 units of a product, and it currently has an advertising expenditure of \(10,000. The company increases its advertising to \)15,000 and then observes that it sells 1200 units of the product. We'll find the advertising elasticity in this case. 1. Calculate the percentage change in quantity demanded: Percentage \space change \space in \space QD = \frac{1200 - 1000}{1000} = \frac{200}{1000} = 0.2 2. Calculate the percentage change in advertising expenditure: Percentage \space change \space in \space advertising = \frac{15000 - 10000}{10000} = \frac{5000}{10000} = 0.5 3. Calculate advertising elasticity: E_a = \frac{0.2}{0.5} = 0.4 The advertising elasticity of this example is 0.4, which means that for every 1% increase in advertising expenditure, the quantity demanded increases by only 0.4%. This suggests that the responsiveness of the demand for this product to a change in advertising is relatively low.