Reference no: EM131280868

Last month, you assumed the position of manager for a large car dealership. The distinguishing feature of this dealership is its "no-hassle" pricing strategy; prices (usually well below sticker) are posted on the windows, and your sales staff has a reputation for not negotiating with customers. Last year, the company spent $2 million on advertisements to inform customers about its "no-hassle" policy and had revenues of $40 million. A recent study from an ad agency indicates that for each 3 percent increase a TV advertising expenditures, a car dealer can expect to sell 12 percent more cars, but that would take a 4 percent decrease in price to generate the same 12 percent increase in units sold. Assuming the information is correct, should you increase or decrease your firm's level of advertising? Explain. Show all calculations and provide the reasoning as clearly and concisely as possible.