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Microeconomic help with elasticity?
How does price elasticity of demand vary along straight line downward sloping demand curve? Why does this occur???
Also, provide an economic explanation for why many companies hire celebrities to advertise their products. Be sure to discuss the possible impact of celebrity endorsements upon price elasticity of demand.
Thanks!!
2 Answers
- Anonymous1 decade agoFavorite Answer
The price elasticity of demand = slope of the demand curve x price/quantity demanded.
In the case of linear demand curve, the slope is constant. P/Q will determine the change in elasticity. Moving down the demand curve by reducing price, the increase in quantity demanded will be smaller. The diminishing marginal utility is playing its part. That's why the elasticity will move from inelastic to unit and elastic downward the linear demand curve.
I love Coke's ads. The celeb makes me crazy.And Coke is elastic. More ads,more sale revenue.
Source(s): Anjaree - 1 decade ago
it is my opinion. i do not know how it suits to your query:
always the reality differs from theory. soaps like lifebuoy, toothpastes like colgate always sell without celebrity ad also. i feel that instead of spending money for celebrity and cricket games, companies can consider giving the products more economical price to the consumer. you mentioned about celebrity. now a days some companies use house wives, that too middle class, for their ad.
