Read e-book online Advertising: Its Place in Political and Managerial Economics PDF

By W. Duncan. Reekie

ISBN-10: 1349020842

ISBN-13: 9781349020843

ISBN-10: 1349020869

ISBN-13: 9781349020867

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Extra resources for Advertising: Its Place in Political and Managerial Economics

Sample text

4 are all implicitly 'envelope' isoquants for the relevant sales responses. 46 Advertising With a given budget Iine AA, the profit-maximising advertiser would select message design D 1 , and would combine his media in the proportions indicated at the point of tangency A 1 • If the costs of TV and press advertising altered, say, press became cheaper and TV more expensive, then the same budget could possibly buy the input combinations indicated by 88. Not only will media substitution take place as the advertiser moves to 8 1 from A 1 , but message design will also alter from D 1 to D 2 • This analysis is not in the least inconsistent with reality.

5. Does Advertising Hamper Freedom of Speech? It is a fact that most national newspapers would have to be sold at a price several times greater than they are at present if they were to survive without the advertising revenue. 2. Advertising revenue and sales income of Newspapers and Periodicals, 7972 Advertising as %of total revenue Sales (Em) Advertising (£m) Total newspapers Sundays Daily mornings Daily evenings Weeklies 226 46 107 55 18 288 39 95 63 89 56 46 45 63 78 Total periodicals Trade, technical and professional Other 114 30 84 105 51 54 48 63 39 Source: Business Monitor, (1973) 69-74.

With knowledge of costs, other than advertising costs, for each sales level, the profit-curve gross of advertising expenditure can be drawn. The net profit curve can also be inserted. The boat-shaped area between the gross-profit curve and the 45° line equals net profits. The profit-maximising firm will consequently produce at that sales level where net profits are maximised (XA 1 ), which is where advertising costs wi II equal YA 1 which equals a budget of OA 1 • This model can readily be adapted to aid budget determination in firms with motives other than profit maximisation.

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Advertising: Its Place in Political and Managerial Economics by W. Duncan. Reekie


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