Advertising Elasticity Of Demand - AED

AAA

DEFINITION of 'Advertising Elasticity Of Demand - AED'

A measure of a market's sensitivity to increases or decreases in advertising saturation. Advertising elasticity is a measure of an advertising campaign's effectiveness in generating new sales. It is calculated by dividing the percentage change in the quantity demanded by the percentage change in advertising expenditures. A positive advertising elasticity indicates that an increase in advertising leads to an increase in demand for the advertised good or service.

INVESTOPEDIA EXPLAINS 'Advertising Elasticity Of Demand - AED'

The impact of an increase in advertising expenditures has on sales varies by industry. For example, a commercial for a fairly inexpensive good, such as a hamburger, may result in a quick bump in sales. On the other hand, advertising a piece of jewelry may not see a pay back for a period of time because the good is expensive and is less likely to be purchased hastily.


Because a number of outside factors, such as the state of the economy and consumer tastes, may also result in a change in the quantity of a good demanded, the advertising elasticity of demand is not the most accurate predictor of advertising's effect on sales.

RELATED TERMS
  1. Inelastic

    An economic term used to describe the situation in which the ...
  2. Demand Theory

    A theory relating to the relationship between consumer demand ...
  3. Demand

    An economic principle that describes a consumer's desire and ...
  4. Substitute

    A product or service that satisfies the need of a consumer that ...
  5. Normal Good

    An economic term used to describe the quantity demanded for a ...
  6. Elasticity

    A measure of a variable's sensitivity to a change in another ...
Related Articles
  1. Fundamental Analysis

    How Influential Economists Changed Our History

    Find out how these five groundbreaking thinkers laid our financial foundations.
  2. Economics

    Understanding Supply-Side Economics

    Does the amount of goods and services produced set the pace for economic growth? Here are the arguments.
  3. Economics

    The History Of Economic Thought

    Economics is a vital part of every day life. Discover the major players who shaped its development.
  4. Economics

    A Practical Look At Microeconomics

    Learn how individual decision-making turns the gears of our economy.
  5. Personal Finance

    Why We Splurge When Times Are Good

    The concept of elasticity of demand is part of every purchase you make. Find out how it works.
  6. Fundamental Analysis

    Google Ads Vs. Facebook Ads

    Universal access to the internet through smartphones, tablets and computers has driven the success of numerous companies. Most notably, Google and Facebook have witnessed staggering growth as ...
  7. Entrepreneurship

    How does a customer base dictate goodwill?

    Find out how a customer base dictates the value of the goodwill by providing a ready market for its products and spreading the word about the firm.
  8. Investing

    Corporate Governance

    Corporate governance refers to the formally established guidelines that determine how a company is run. The company’s board of directors approves and periodically reviews the guidelines, which ...
  9. Entrepreneurship

    How do companies like ClickBank help websites make money?

    Find out how sites such as ClickBank help websites make money by offering the opportunity for vendors and affiliates to promote websites and products.
  10. Personal Finance

    How Shazam Makes Money

    Prior to universal access to digital technology, identifying music in restaurants, bars, or stores was difficult to nearly impossible. Founded in 2000, Shazam provided a readily-available solution ...

You May Also Like

Hot Definitions
  1. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  2. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  3. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  4. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
  5. Break-Even Analysis

    An analysis to determine the point at which revenue received equals the costs associated with receiving the revenue. Break-even ...
  6. Key Performance Indicators - KPI

    A set of quantifiable measures that a company or industry uses to gauge or compare performance in terms of meeting their ...
Trading Center