Price elasticity of demand and advertising elasticity

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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).

(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?

Reference no: EM132548457

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