Contents

EA= Proportionate or Percentage change in quantity demanded/Proportionate or the percentage change in the advertisement or promotional expenditure

EA = (ΔQ/Q)*100/ (ΔA/A)*100 = (ΔQ/ΔA)*A/Q

Where Q= Initial quantity; A=Initial units of advertising expenses; ΔQ= change in quantity demanded of goods; and ΔA= change in advertising expenses or the promotional expenses

#### Relatively Elastic Demand (EA>1)

When a percentage change in quantity demand of a product is higher than the percentage change in advertisement expenditure by a firm then this is the case of the relatively elastic advertisement or case of advertisement elasticity of demand greater than one. It means a relatively lower percentage change in promotional expenditure beings a higher percentage increase in the quantity demand of a product.

#### Unitary Elastic Demand (EA=1)

It is the situation in which the percentage change in quantity demand is equal to the percentage change in advertisement expenditure of the firm. If a certain percent increase in advertisement expenditure brings an equal percentage change in sales volume of the business firm then promotional elasticity is equal to one.

#### Relatively Inelastic Demand (EA<1)

When the percentage change in quantity demand of a commodity is less than the percentage change in advertisement expenditure of the business firm then it is relatively inelastic demand resulted from the advertisement. It means a certain percentage change in the promotional expenditure by the business firm brings a change in sales volume by a lower percentage then it is the case of advertisement elasticity of demand less than one.

The following table shows the summary of degrees or types of advertisement elasticity of demand.

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