Promotional elasticity of demand

Promotional elasticity of demand
types of elasticity of demand

1. BUSINESS ECONOMICS
Name : Sneha Kumari

Class/Div: A-FYBFM

Roll no. : 30



PROMOTIONAL ELASTICITY
OF DEMAND

2. What is Promotional Elasticity of Demand ?
●Promotional Elasticity of Demand is a change in the quantity
demanded of a commodity due to change in advertisement
expenditure.


●This elasticity of demand is very useful to business firms to find
out the impact of their advertisement expenditure on the demand for
the commodity.


●Future expansions, innovations and modifications are planned by
business firms with the help of promotional elasticity of demand.

3. Formula for promotional ED

Promotional ED = Proportionate change in quantity demanded of X
Proportionate change in advertisement expenditure
= △Qx ÷ △A
Qx A



Symbolically = △Qx ÷ △A
A Qx

4. Helps the firms in
deciding advertising
expenditure or budget.
KEY TAKEAWAYS OF
PROMOTIONAL ED

Generating new sales for
company.

Helps in withdrawing ineffective
promotional campaigns..
Helps in strategic management to
respond to competitor’s
promotional policies.

5. In the short run, the impact of advertising on firms can
have an impact on both supply and demand curves.
Effect of an advertising campaign on demand curve.

6. Example:
Depending on which sector is in question, advertising may have a different effect.
For instance, in business to business impact of advertising may be different than the
impact of mass retail advertising.
The sale of a Air India is not the same as a cardigan at H&M, and demand in each of
these sectors is different because of the product produced, and the impact of
advertising also differs by sector. In the short run, in mass-market products, the
impact is generally to increase sales. Other more cyclical sectors may depend more
on economic conditions rather than advertising to increase sales.

7. THANK YOU !