Which of the Following Is a Disadvantage of the All-You-Can-Afford

question 60

Multiple Choice

Which of the following is a disadvantage of the all-you-can-afford approach to deciding advertising budget?

• A) It assumes a connection between liquidity and advertising opportunity.
• B) It views advertising as a function of sales, rather than sales as a function of advertising.
• C) It does not limit its advertising outlays to the amount of available funds.
• D) It sets no limits on the expenditures for advertising.

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Definitions:

Utility Function

A numerical model that explains how a consumer gains pleasure or usefulness from using goods and services.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, holding the consumer's utility level constant.

Income Effect

The alteration in the income of a person or the economy, and its effect on the amount of a product or service that is requested.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, causing consumers to substitute away from more expensive goods towards cheaper ones.