advertising
Nowadays, advertising is a very big business. Very often is the major means of competing among firms. Furthermore, supporters of advertising claim that it brings specific benefits for consumers. First off all, they claim that advertising provide information to consumers about the quality or the availability of several products. This is very important for consumers because they do not waste time for searching (search costs). If we suppose, that consumers want to shop at the lowest price shop but, they do not know which is the store with the lowest prices, then they gather information by reading and watching advertisements and TV commercials respectively or by visiting several stores. This action of consumers makes prices to fall, but only if consumers have the appropriate information. Otherwise the prices may rise. Supporters of advertising also claim that advertising may encourage price competition among the firms, if prices feature significantly in the advertisement. In addit!ion to this, by increasing sales through advertising, firms can gain economies of scale, which means that it will help to keep prices down. As we can understand information is very essential for consumers, not only because it lowers the prices, but also be
Imperfect information, as well as asymmetric information, lowers quality. "Suppose that the law prohibits the misleading of the fabric content of clothing. It is one of the explanations of how advertising can improve consumer's information about the quality of products. It is easy to understand here, that this can make sense only if they expect their product to be successful for a very long time, long enough for the consumers to find out that the product is really good. As I noted above, advertising can improve consumer's information the quality of several products. Lying advertising called and "hit and run" advertising as well. This is a real problem for producers who know that their products are good. S sales American Brands 49 277,084 4. As we can from the table, Philip Morris spent a very large amount for advertising, equal to 6. In a world with informative advertising, goods are much better and producers as well as consumers gain more. Of course false advertising is illegal but firms can advertise in a false or a misleading manner for years. cause it improves the quality of several products. Advertising may sometimes be false and uninformative. But is advertising always truthful and informative? The answer to this question is "no". Consumers can gather information for several products through advertisements and because of this, producers must improve the quality of their products.
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