Question

Describe the positive and negative views of the economics of advertising. The arguments over advertising focus on three major questions:

(a) Is advertising persuasion or information?

(b) Does advertising promote monopoly power or competition?

(c) Does advertising contribute to economic waste or economic efficiency?

Answer 1

a. Informative and convincing ads are powerful tools that can be used to communicate the advantages of the goods or services of a business. While both types are useful resources to create a brand and convey a message, they have their differences and each should be used strategically. The main variations in these marketing strategies are linked to how the data is being distributed. Informative marketing has convincing tactics, but relies more on evidence, while persuasive advertising tries to appeal to the emotion of the customer to close the sale.

Although there are variations between insightful and convincing advertising, they all share the common aim of persuading people to do something in response to an advertisement message. Public service advertisements are known to be informative about the dangers of smoking cigarettes, but they are meant to encourage smokers to stop smoking. As shown above with the Miller Lite commercial, most insightful advertisement is intended to convince. This ad was intended to be informative, but also to encourage beer drinkers to use the information provided to switch brands. "Data persuasion ads" may be as effective as persuasion advertisement in implementing changes in attitude or behaviour in appropriate circumstances

b. Generally speaking, there is a positive relationship between the degree of market power concentration and the proportion of overall advertising costs. Some argue that this correlation is causal; high advertising investment is the cause of concentration. It is likely to result in higher prices for consumers and lower output rates to the degree that marketing raises competition in the industry. The higher advertisement-related prices are not simply the result of passing the marketing costs to consumers themselves; higher prices often stem from the monopoly power that advertising generates.

c. In the business cycle, marketing still plays an important role. Advertising changes its emphasis as the broader economy moves between periods of growth and recession. In downturns, advertisements that concentrate on the price of a product or service, like the one we're in now. When one company cuts ads to cut costs during a recession, another company can raise ad spending to attract consumers and increase their market share. Advertising helps boost economic growth. In a world where consumer spending is shaping the economy's future, marketing allows people to spend more