Question

Consider the market for beer. Have you ever wondered why there are so many commercials for...

Consider the market for beer. Have you ever wondered why there are so many commercials for different brands of beer? Explain this phenomena using economics and market structures. If you do not have experience in the beer market, you can analyze the market for automobiles or the market for soda. Be sure to state the market structure for the market you selected and clearly explain why the firm advertises.

Homework Answers

Answer #1

The market for beer is monopolistic competition where there are a lot of different smaller companies competing for the consumer share. All have differentiated products which can be a substitute for each other. All have some control over their product that is why the demand curve is downward sloping.

The firm in the monopolistic competition advertises because they have to differentiate their product from the other , for this they use different strategies like packaging, branding, advertising etc. it will increase their market power and profit. the more they differentiate from other the more they will behave like monopoly and make a better profit.

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