Compute the price elasticity of demand

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Suppose that the demand function of a new face cream is described by the demand function: ( , ) = ^(-1/2) ^(1/4) , where represents the quantity demanded, represents price, and represents advertising expenditures.

(i) Compute the price elasticity of demand ( ) and the advertising elasticity of demand ( ). (Please show your detailed calculations and answers).

(ii) What do you predict the advertising-to-sales ratio would be in this industry? (Please demonstrate your method)

(iii) Does it depend on how costly it is to advertise for this product? Why? Why not? (Explain carefully)

Reference no: EM132548466

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