Class 11.

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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 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

Figure 13.1  Advertising and profit maximization in monopoly

Figure 13.2  Advertising, market structure and concentration

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