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Business Studies Assignment (Doc)

   

Added on  2020-04-15

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Running head: BUSINESS STUDIESBUSINESS STUDIESName of the StudentName of the UniversityAuthor’s Note

1BUSINESS STUDIESTable of ContentsIntroduction......................................................................................................................................3Part A...............................................................................................................................................3Question 1........................................................................................................................................3Question 2........................................................................................................................................5Question 3......................................................................................................................................10Conclusion.....................................................................................................................................15References......................................................................................................................................16

2BUSINESS STUDIESIntroductionThis assignment focuses on the important aspects of marketing and its significance inbusiness organizations. Marketing refers to the process by which the good or service is promotedand introduced to the potential customers (Baker and Saren 2016). One of the vital componentsof the marketing process is advertising. Advertising mainly works on the basis of statistics. Itbuilds awareness, trust and credibility among the customers. This study elucidates on impact ofadvertisement and marketing on the elasticity of demand. The relationship between advertisingand short run as well as long run profit is also illustrated in this paper. The methods reflectingprofit-maximizing position for the price making firm is also explained in this study. Theusefulness of marginal revenue and marginal cost in establishment of advertising budget is alsodiscussed in this assignment. The structure of advertising industry and the main features of fourmarket structure are also analyzed in this paper. Part AQuestion 1 The elasticity of demand also known as price elasticity of demand, usually measuresresponsiveness of change in quantity demanded of the product due to alteration in its price.Theoretically, the total revenue of the organization is maximized when the elasticity of demandfor the product becomes equals to one (Bauer 2014). Advertising being an important componentof marketing affects the elasticity of demand of a product. This means that price elasticity ofdemand changes owing to advertisement expenditure, which in turn have noteworthyimplications for the price-output equilibrium. Owing to increase in advertising expenditure, the

3BUSINESS STUDIESdemand for the commodity increases leading to shift in demand curve to right. In context to this,the elasticity of demand remains either same, increases or decreases when the demand for theproduct increases. The main intention of the manufacturer advertising particular brand is todifferentiate it from the perspective of consumers and their rivalries. In fact, higher level ofdifferentiation of the brand from other rivalries and decline in elasticity of substitution causes fallin price elasticity of demand for the good at each price owing to rightward shift of demand curveunder influence of advertisement (Moriarty et al. 2014). Therefore, elasticity estimating rise orfall in advertising in the competitive market is also referred to as advertising elasticity of demand(AED). Thus, the AED must signify positive value because higher the value, larger thesensitivity of products demand to change in advertising. It also indicates higher the sales ofproducts produced by the organization. The hub of marketing is to predict the consumer’sresponse to various forms of stimulus. The organizations’ pricing strategy and proper marketingfoundation affects the price elasticity of demand (Shefrin and Statman 2013). Few companiesmainly strategizes to offer more inelastic good through the process of marketing as well asproduct development in order to increase its demand in the competitive market.The optimal strategy of each organization is to increase short –run profit. When theorganizations strategizes their advertising decisions in the short run, there are several conditionsthat should be taken into account in order to maximize profit. There is a positive relationshipbetween valuation and advertisement. Newbold, Carlson and Thorne (2012) opines that, effectiveadvertisement helps the companies in creating sales profitably. Apart from this, effectiveadvertisement can decline profit margin in the short run because advertising budget refers todirect spending against present revenue (Rios, M.C., McConnell, C.R. and Brue 2013).Additionally, the mechanism of advertisement is also analyzed in long run if its effect exists

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