How does advertising promote market competition and impact the economy and society?

While advertising is a means of profit for sellers, it also promotes market competition and has a significant impact on the economy and society. It diversifies consumers’ purchasing decisions, stimulates production, fosters economic growth, and drives cultural change. However, it also raises the issue of environmental pollution.

 

While advertisements are designed to make a profit for the advertiser, the seller, they also have an impact on the marketplace, whether or not the advertiser intends it to. For one thing, advertising can promote competition among sellers in monopolistic markets. This effect occurs when buyers exposed to product information through advertising become more sensitive to the quality or price of a product. If buyers change their demand in response to price, sellers become more price-conscious, which leads to price competition. Competition is also fostered by the ease with which new sellers can promote new products and enter the market through advertising. As more sellers compete in the market, each seller’s monopoly position is weakened, and buyers are able to purchase a wider variety of products at lower prices.
Advertising also serves to diversify purchase choices by providing buyers with new information and ideas. Advertising allows consumers to compare the characteristics and benefits of different products, which in turn helps them make better purchasing decisions. For example, advertising that a particular product is eco-friendly or socially responsible in its manufacturing allows consumers to choose products that align with their values. This can lead to better quality in the overall market by forcing companies to compete not just on price, but on quality and ethics.
Advertising can also have an impact on the economy and society as a whole, beyond the monopolistic competitive market for a particular product. The combined effect of individual advertisements, which arouse the latent needs or desires of buyers and promote consumption of targeted products, can be expected to create a virtuous cycle in the economy as a whole. Compared to the absence of advertising in the economy, advertising can increase consumption by reinforcing consumers’ desire to replace old products with new ones and shortening the fad cycles in which new products become popular. Stimulated consumption stimulates production activity. Since the production of goods involves factors of production, such as human labor, machinery, and equipment, an increase in production activity results in an increase in employment or investment. Increased employment and investment can increase the incomes of buyers who are either workers or investors. The extent to which consumption increases when the income of the economy as a whole increases is called the marginal propensity to consume, which is positive, meaning that consumption increases when the income level of the economy as a whole increases.
However, the consumption-promoting effects of advertising are often criticized by those concerned about environmental pollution. This is because pollution is not only caused by consumption, but also by the production activities that are fueled by consumption. It is unlikely that either the seller or the buyer will pay enough to reduce pollution to an acceptable level, so in most cases, pollution will remain high.
The social impact of advertising goes beyond mere economic effects; it also has a profound effect on the culture of society. Advertisements often highlight certain lifestyles or cultural trends, shaping public perceptions and driving change. For example, advertisements that emphasize healthy lifestyles can increase health awareness, while ads that promote sustainable products can help create a culture of eco-friendly consumption. Thus, advertising is more than just a sales tool; it is an important factor that deeply influences the values and culture of society as a whole.
In conclusion, advertising is not only a means for sellers to pursue profits, but also plays an important role in promoting market competition, diversifying consumer choices, driving a virtuous cycle in the economy, and changing social values and culture. Therefore, continuous research and policy efforts are needed to maximize the positive effects of advertising and minimize its negative effects.