Question

Option 1: 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.

Answer 1

Let's go with Beer.

The firm in the beer market works in an Oligopoly market structure. That means the product these firms are selling is more or less the same i.e. there is not much difference between the products in the market and there are very few large firms selling to a large number of the consumer.

In such a scenario, the firms in the market are likely to differentiate the product fro other using the non-price differentials. It includes the Branding, packaging, and advertising telling how their goods are different from the other. This is the reason why we so many advertisements for these beer brands.