**Theory of Economic Information - Definition of Advertizing Elasticity**

The percentage increase in demand divided by the percentage increase in advertising spending is NOT a valid definition of advertising elasticity.

Get rid of illusions...

E = (dD/D) / (dZ/Z)

In this formula:E = Elasticity

D = Demand

Z = Cost of advertising (the ratio of instantaneous increments - differential equations)

Elasticity shows the percentage change in demand for a dollar spent.

Advertising effectiveness - show change the price of demand.

D(Z, P) = D(P)(1+D(Z))

In this formula:

D(P) = Price demand

D(Z) = Advertising demand

D(Z, P) = Demand for goods.

If D(Z,P) > D(P) then there is positive efficiency

If D(Z,P) < D(P) then there is negative efficiency

If D(Z,P) = D(P) then there is no inpact.

For more information, read articles by Stigler (The Theory of Economic Information )