What should the company’s advertising-to-sales ratio be

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Reference no: EM131253873

Suppose your company produces athletic footwear. Marketing studies indicate that your own price elasticity of demand is 3 and that your advertising elasticity of demand is 0.5. You may assume these elasticities to be approximately constant over a wide range of prices and advertising expenses.

a) By how much should the company mark up price over marginal cost for its footwear?

b) What should the company's advertising-to-sales ratio be?

Reference no: EM131253873

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