Question

Last month you assumed the position of manager for a large car dealership. The distinguishing feature of this dealership is its "no hassle" pricing strategy; prices (usually well below the sticker price) are posted on the windows, and your sales staff has a reputation for not negotiating with customers. Last year, your company spent $2 million on advertisements to inform customers about its "no hassle" policy, and had overall sales revenue of $40 million. A recent study from an agency on Madison Avenue indicates that, for each 3 percent increase in TV advertising expenditures, a car dealer can expect to sell 12 percent more cars—but that it would take a 4 percent decrease in price to generate the same 12 percent increase in units sold. Assuming the information from Madison Avenue is correct, should you increase or decrease your firm’s level of advertising? Explain.

Answer 1

The answer and procedures of the exercise are attached in the following archives.

Step-by-step explanation:

You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.