Advertising Elasticity Of Demand - AED

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.

BREAKING DOWN '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. Advertising Appropriation

    The portion of the total marketing budget that is allocated to ...
  2. Flighting

    An advertising scheduling strategy in which a business alternates ...
  3. Advertising Federation Of America ...

    A regional advertising group based on the U.S. East Coast that ...
  4. Below The Line Advertising

    In general, an advertising strategy in which a product is promoted ...
  5. Advertising Budget

    An estimation of a company's promotional expenditures over a ...
  6. Advertising Association Of The ...

    A regional advertising group based on the American West Coast ...
Related Articles
  1. Investing

    Bye, Mad Men: How the Net Is Changing Advertising (FB, TWTR)

    The Internet and digital media are changing the way companies advertise and market themselves. More targeted, varied and faster advertising is possible.
  2. Investing

    How is Programmatic Advertising Changing Media?

    Understand what programmatic advertising is as well as the technology that drives it. Learn about the top four ways programmatic advertising is changing media.
  3. Investing

    Trends And Growth In The Digital Advertising Industry

    The rapidly expanding digital advertising industry is leading a shift towards content and demanding forced innovation.
  4. Personal Finance

    How The Internet Web Ad Industry Works

    Over the past 10 years, advertising strategies have evolved as a result of technological development as the internet has provided new channels for advertisers to reach a larger audience.
  5. Fundamental Analysis

    How Demand Changes With a Variation in Price

    What is demand elasticity?
  6. Professionals

    Price Elasticity

    Price Elasticity. Learn about price elasticity and its effects on the demand curve.
  7. Investing

    Advertising From TV To Internet: An Industry History

    Changes in television consumption habits have forced advertising to target audiences through new means, namely Internet advertising.
  8. Professionals

    Elasticity of Demand

    Elasticity of Demand. Learn how income elasticity affects buying patterns.
  9. Economics

    Economics Basics: Elasticity

    Investopedia Explains: What elasticity is, how to calculate elasticity, the difference between elastic and inelastic curves, and the various factors that impact elasticity.
  10. Economics

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
RELATED FAQS
  1. What are the key differences between marketing and advertising?

    Understanding the role advertising plays in the marketing mix will help business owners define their promotional strategies ... Read Answer >>
  2. What are some examples of demand elasticity other than price elasticity of demand?

    Learn about income elasticity of demand and cross elasticity of demand and how to interpret these two measures of demand ... Read Answer >>
  3. Which factors are more important in determining the demand elasticity of a good or ...

    Learn about demand elasticity of goods and services and the main factors that influence the elasticity of demand. Read Answer >>
  4. How important is advertising revenue in the Internet sector?

    Learn about the importance of advertising revenue in the Internet industry. Find out how much Internet firms rely on advertising ... Read Answer >>
  5. Under what circumstances might price elasticity significantly change?

    Discover under what circumstances price elasticity of demand might change and why it is such an important economic concept ... Read Answer >>
  6. How many years can structural unemployment last?

    Understand the two different types of price elasticities, and learn how each one affects the stock purchasing decision of ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center