Purchase Solution

The role of advertising for the marketplace

Not what you're looking for?

Ask Custom Question

In the early 1980's just as serious health effects were being noted about sugar consumption, Kellogg's changed the name of Sugar Pops to Corn Pops (the sugar content did not change) and the name of Sugar Flakes to Frosted Flakes (still sugar content remained the same); General Mills produces two cereals (Total and Wheaties) that are identical in content as two different cereals (one for the healthy and one for the athletic) with different prices to different consumers. This begs the question about the role of advertising in markets. While economists freely admit that advertising that earn millions for firms, economists often view advertising as wasteful since it does very little to inform consumers. Think about that last 5 ads you have seen (TV, radio, internet, subway) and discuss EACH what was the role of the advertising for the marketplace.

Purchase this Solution

Solution Summary

The role of advertising for the marketplace is assessed.

Solution Preview

Generally, firms in monopolistically competitive markets advertise. This is because each firm sells a product that is at least slightly differentiated from its competitors' products. Think of Coke vs. Pepsi, or Cheverolet vs. Ford. Each manufacturer has a monopoly over its own product, but there are similar products that compete for the same market share. The more differentiated a product is, the more a producer is likely to spend on advertising.

Some economists see advertising in a negative light. Mainly, they assert that advertising manipulates consumers' tastes and tries to convince consumers that the products are more differentiated than they really are. Additionally, some economists assert that advertising impedes competition by creating irrational brand loyalty and reducing consumers' awareness of price differences.

On the other hand, many economists see advertising as a positive factor. ...

Purchase this Solution


Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.