3. Economics Of Advertising Flashcards
Why does all this advertising take place?
To influence consumer behavior, boost sales, and build brand loyalty
How is advertising related to competition?
It helps firms differentiate themselves and gain a competitive edge in the market
What is the relevance of oligopoly and monopoly in the advertising context?
In oligopolies, firms aggressively advertise to capture market share, while monopolies may advertise to maintain dominance
What is the idea behind Galbraith’s theory about the role of advertising?
Advertising allows firms to control markets by shaping consumer demand and preferences
What is an informative advertisement?
Educating consumers about product features and benefits to aid purchasing decisions
What is persuasive advertising?
Influencing consumer behavior and fostering brand loyalty beyond providing information
What is brand proliferation?
Introducing multiple brands or similar products to create the illusion of choice and deter new entrants
How can advertising be a barrier to market entry?
Heavy advertising by established firms imposes high setup costs on new entrants, deterring competition
What is the relationship between wealth and levels of advertising?
Wealthier countries tend to have higher advertising expenditure per capita
What are the two arguments about the relationship between advertising and living standards?
Advertising stimulates consumption and economic activity in affluent countries, but it can also be viewed as a waste of resources, diverting funds from other uses
What are the two most common ways of researching the effectiveness of advertising?
Measuring message success and direct tests of advertising effects on sales or profits
How has new media changed the process of advertising?
New media offer increased communication channels, targeting options, and interactivity, but also present challenges to traditional advertising models
