Assignment Task: Advertising Intensity
A one percent increase in prices is associated with a ten percent reduction in the traded units in industry 1. Meanwhile, a one percent increase in prices is associated with a - per- cent reduction in units traded in industry 2. However, it is well known that advertising expenditures have an equally large effect on sales in both industries. With this information, what would you expect for advertising intensity? Would you expect it to be roughly the same for both industries, higher in industry 1 than industry 2, or higher in industry 2 than industry 1? Justify you answer.