Tutors on net
Tutors on NetTutors on Net

Optimal Level Of Advertising

  Non-Price Rivalry Advertising Outlay

       The optimal level of advertising outlay is ascertained at the level of at which marginal contribution to profit MPC of advertising outlay parities to the marginal cost of advertising MCA. Therefore, at the maximum level of advertising outlay,

                                    MPC    =          MCA

       Let us elaborate this rule still more. Marginal contribution to profit MPC is the difference between marginal revenue and marginal cost. Marginal revenue is the addition to aggregate earned from manufacturing and selling an extra from manufacturing and selling an extra unit of productivity MR = delta TR / delta V.

       Marginal cost is the addition to aggregate to total cost of manufacturing of by an additional unit of productivity. The marginal profit contribution MPC is therefore provided by the difference between the marginal revenue MR and marginal cost of manufacturing MC of an extra unit of productivity.

       Therefore, MCP = MR – MC.

       Alternatively, marginal cost of advertising is the extra cost of advertisement MCA necessary for selling an extra unit of productivity. That is,

       MCA   =          Delta A / Delta V

       Where, delta A is variation in cost of advertisement incurred on sale of an extra unit of productivity delta V. As stated above the industry will go enhancing the advertisement cost MAC. Therefore, maximum or profit optimising level of advertisement outlay will be reached at the level where

      MPC    =          MCA

      MPC    =          MR – MC and

      MCA   =          ΔA / ΔV

       Therefore, at the optimal level of advertising

            MR – MC        =          ΔA
                                               ΔV

       Therefore, MR = ΔTR / ΔV and MC = ΔTC / ΔV, we can declare the stipulation for maximum level of advertisement outlay as

            ΔTR - ΔTC                  =          ΔA
            ΔV       ΔV                                ΔV

Or        ΔTR      =         ΔTC     +          ΔA
              ΔV                   ΔV                   ΔV

      Therefore, if extra cost of advertisement is added to marginal cost of manufacturing and calling it as marginal cost of manufacturing and sale or MC*, the situation for maximum level of advertising outlay can be stated as under:

                        MR      =          MC*

       Therefore, in the following scrutinising we will use this concept of marginal cost which is inclusive of marginal cost of advertising outlay. We describe and diagrammatically illustrate the maximum level of advertising and ascertainment of industry’s symmetry productivity and price in the following two cases:

  1. Maximum level of advertising outlay with price and product variety as given and invariable.
  1. Maximum level of advertising outlay when both price and productivity are variable but product variety stays invariable.

Maximum Level of Advertising Expenditure: With Price and Product Variety as Invariables

      A significant question is how much selling costs an industry will undertake as to optimise its profits. In other words, what is the maximum volume of advertisement for an industry; the determination of maximum advertising expenditure selling cost for the industry can be described with the average and marginal cost curves.

      For describing the volume of advertising outlay with average and marginal costs, we have to use maximum the aspect of average selling costs when advertisement is considered to be variable.

      In the above where ASC and APC are average selling costs and average manufacturing cost curves accordingly. Average selling cost curve ASC has been superimposed over the average manufacturing cost curve APC to procure average aggregate cost curve AC (AC = APC + ASC).

It must thus be noted that the vertical remoteness between the AC and APC curves measures the average selling cost. MC is the marginal curve to the average aggregate cost curve AC.

     We presume that price OP has already been set by the industry which is kept invariable. Moreover, the nature of the product is also held unvaried and it is only the advertising outlay which is changed and subsequently demand curve moves to the right and productivity sold enhances.

     Therefore, price of the commodity stays fixed at OR, the horizontal line RL can be sighed as if it were a marginal revenue curve. This is for the reason that through enhancement in advertisement outlay, an industry can sell more volume of the commodity without lowering price.

    If the industry aims to optimise profits, then it will be in symmetry considering advertising expenditure where the marginal cost which is inclusive of both the enhancement in manufacturing cost and selling cost incurred on extra unit of productivity which parities to the marginal revenue, i.e. provided price OR.

    It will be seen from the above diagram that marginal cost parities to the marginal revenue at OV level of productivity at which profits will be optimised. With OV as the productivity manufactured and sold aggregate profits made by the industry in its symmetry position and parities to REPT and as is evident from the diagram, average selling cost incurred in its symmetry position parities to VD or BP.

    Therefore, the maximum volume of advertisement expenditure, acquired by the industry wills parity to VD or BP incremented by the productivity OV.

Online Live Tutor Maximum Level of Advertising Expenditure: With Price and Product Variety as Invariables:

         We have the best tutors in Economics in the industry. Our tutors can break down a complex Maximum Level of Advertising Expenditure: With Price and Product Variety as Invariables problem into its sub parts and explain to you in detail how each step is performed. This approach of breaking down a problem has been appreciated by majority of our students for learning Maximum Level of Advertising Expenditure: With Price and Product Variety as Invariables concepts. You will get one-to-one personalized attention through our online tutoring which will make learning fun and easy. Our tutors are highly qualified and hold advanced degrees. Please do send us a request for Maximum Level of Advertising Expenditure: With Price and Product Variety as Invariables tutoring and experience the quality yourself.

Online Non-Price Rivalry Advertising Outlay Help:

         If you are stuck with an Non-Price Rivalry Advertising Outlay Homework problem and need help, we have excellent tutors who can provide you with Homework Help. Our tutors who provide Non-Price Rivalry Advertising Outlay help are highly qualified. Our tutors have many years of industry experience and have had years of experience providing Non-Price Rivalry Advertising Outlay Homework Help. Please do send us the Non-Price Rivalry Advertising Outlay problems on which you need help and we will forward then to our tutors for review.