PS5_Solutions - AEM 4150 PRICE ANALYSIS Fall 2008 Problem...

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AEM 4150 PRICE ANALYSIS Fall 2008 Problem Set #5 Suggested Solutions 1. (a) Generic advertising (b) False. Average benefit cost ratio (ABCR) of advertising measures the return to every dollar spent on advertising. (c) False. 40 cents per $100 value. Value tax or ad valorem tax. (d) False. To obtain the marginal benefit cost ratio (MBCR) of advertising, we need to simulate a 10% plus scenario where there is a 10% increase in the historical advertising. (e) Optimal advertising on TV: 9 . 6 690 . 0 * 10 004 . 0 003 . 0 02 . 0 06 . 0 06 . 0 * 10 = = + + + million Optimal advertising on radio: 3 . 2 230 . 0 * 10 004 . 0 003 . 0 02 . 0 06 . 0 02 . 0 * 10 = = + + + million Optimal advertising on outdoor: 34 . 0 034 . 0 * 10 004 . 0 003 . 0 02 . 0 06 . 0 003 . 0 * 10 = = + + + million Optimal advertising on print: 46 . 0 046 . 0 * 10 004 . 0 003 . 0 02 . 0 06 . 0 004 . 0 * 10 = = + + + million 2. (a) Demand function: Qd/Pop = -.13 -.024 RFP/CPI + .0006 INC/CPI + .0075 BPI/CPI + .948 AU19 + .0009 TREND Qd = -.13 POP- .024 RFP/CPI * POP + .0006 INC/CPI * POP + .0075 BPI/CPI * POP +
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PS5_Solutions - AEM 4150 PRICE ANALYSIS Fall 2008 Problem...

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