As a newly hired manager at your firm, you decide to start your tenure by assessing the

Question:

As a newly hired manager at your firm, you decide to start your tenure by assessing the sensibility of your current advertising expenditure. To do this, you ask your analytics team to collect useful data on the quantity of your product sold, the price, and advertising (in thousands) across a range of markets where your product is sold. The data they collected are in the spreadsheet below:

a. Using these data, determine the advertising elasticity of demand and the own-price elasticity of demand. (Hint: Recall what a log-log regression provides in terms of estimates).

Advertising elasticity of demand:

Own-price elasticity of demand:

b. Ignoring issues concerning the precision of your estimates, what is the profit-maximizing advertising-to-sales ratio for your product?

Advertising Price Quantity 11 35 1963 13 35 717 19 43 289 10 48 309 341 16 46 17 34 1663 918 20 19 11 18 30 50 35 105 730 44 20 34 372 14 37 360 20 485 42 48 41 16 13 12 125 806 36 386 20 34 1195 763 15 38 19 33 1932 17 50 114 10 31 1042 19 31 965 12 19 33 569 132 17 45 49 111 16 16 47 285 13 18 16 38 34 442 1514 174 41 47 297 16 18 15 43 30 224 1203 279 48 17 12 15 30 1789 18 43 864 12 35 525 18 38 34 20 16 892 618 192 209 43 12 49 20 47 157 425 17 43 20 39 548 15 39 547 17 160 45 32 14 15 1026 7 15 39 527 452 44 18 19 42 33 36 174 1030 17 13 520 19 48 256 13 39 359 288 41 11 13 17 43 901 47 117 16 45 375 674 19 17 30 4 1 15 379 14 43 30 36 5
5 1314 15 395 20 31 42 1291 253 16 B
2 10 31 1058 145 10 44 17 36 628 18 34 555 1
2 B
1 10 42 263 18 4 13 31 618 196 10 49 47 19 3
10 33 273 748 440 821 日
12 35 口
16 33 202 20 20 43 41 185 14 39 588 15 48 375 19 300 42 43 5
19 4