Which Method of Setting Advertising Budgets Best Helps Management Think

question 49

Multiple Choice

Which method of setting advertising budgets best helps management think about the relationship between promotion spending, selling price, and profit per unit?

• A) adaptive-control method
• B) percentage-of-sales method
• C) competitive-parity method
• D) objective-and-task method
• E) affordable method

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Definitions:

Price Inelastic

Describes a situation where the quantity demanded or supplied of a good or service changes by a smaller percentage than the percentage change in price.

Cross Elasticity

A measure of how the quantity demanded of one good responds to a change in the price of another good.

Substitute Goods

Products or services that can be used in place of each other. When the price of one falls, the demand for the other product falls; conversely, when the price of one product rises, the demand for the other product rises.

Cross Elasticity

A measure of how the quantity demanded of one good responds to a change in the price of another good, indicating the degree of substitutability or complementarity between them.