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Class 11

Class 11. Advertising. Determinants of adv. Expenditure: Disposible income Unemployment Government regulation Informative and persuasive ads. Launch product İnformation provision İncrease mkt. Share Brand image. Monopolist.

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Class 11

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  1. Class 11

  2. Advertising • Determinants of adv. Expenditure: • Disposible income • Unemployment • Government regulation • Informative and persuasive ads. • Launch product • İnformation provision • İncrease mkt. Share • Brand image

  3. Monopolist • Monopolist would advertise until MC of advertising is equal to MR of advertising • Diminishing returns • Dorfman – Steiner condition: • Share of advertising= ratio of advertising elasticity of demand and price elasticity of demand • When advertising elasticity is high relative to price elasticity, it is efficient to advertise • When price elasticity is high relatie to advertising elasticity, it is efficient to cut price

  4. Figure 13.1Advertising and profit maximization in monopoly

  5. Figure 13.2Advertising, market structure and concentration

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