1. Name the three views of economics of advertising which evolved in the history of advertising?: Informative view, persuasive view, complementary view—> Advertising affects demand by exerting a complementary influence in the consumer’s utility function with the contemption of the advertised product
2. What is the main impact of advertising in the economics of a society: The typical expected effects are to raise sales, to maintain them over time, and to improve the general image of the firm. Advertising follows logically after listening to consumer requirements, introducing productive conditions, distributing the goods. —> now different subcultures.
3. What are the different types of industry level market competitions and how advertising affects each type of markets?: BUSSINESS CYCLE:-Advertising speeds up diffusion of new goods.-It prepares and accompanies the phase of take off, when "dominant design" defines the final form of a good.
MARKET COMPETITION:Oligopolists:- Few number of powerful sellers- increasing market share and deman rise.Perfect Competition:- Large consumer market (same product is sold by manyfirms)- spill over effect (individually)- At the industry level market demands increases. This will help new entrants which will cause prices to go down. Monopoly:- Low consumer market- To generate awareness
4. How informative advertising is used in any industry: • A promotional effort at generating interest in a good, service, or organization by providing consumers with information.• Often used to generate a good reputation for the business running the ads, or correct any mistaken impressions • Create a brand image for the company. • Allows the potential customer to feel in control to make their own informed decisions. • Types of advertising: mobile, email spam, digital signage, online display advertising, and unpaid advertising—> Example auto industry
5. Explain any one model of informative advertising. Billboard Advertising: -One of the simplest models of informative advertising in that supply is a function of open land and demand is derived from the demand for the product the advertisers are selling - The economics of how roadside billboards are used to inform the public- When the supply of billboards is higher, the greater the informative advertising there is.- Comes in a variety of forms, including mobile billboards
6. How persuasive advertising affects the particular products: -Assumes that the consumer already understands the basic nature of the product. -Convinces consumer of the benefits that set a particular product apart from the competition. -Marginal benefit of product A > Marginal benefit of product B—>Opportunity Cost
7. How does advertising affect the economy- Makes jobs -Reduces selling costs-Increases company profits-Increases company security-Speeds up consumption.
8. What is the difference between micro and macro economics?: Microeconomics: Object of interest is a single (or small number of) household or firm.
Macroeconomics: Object of interest is the entire economy. We care mostly about:1. Growth2. Fluctuations