Advertising (Economics)

Communication about a company's products or services for sale, through electronic media, television, newspapers, magazines, billboards, and any other forum that has visibility. Companies try to convince consumers to buy their products through advertising because of competition from other companies. In addition, companies use advertising to differentiate their products and to create consumer awareness of and familiarity with a company's products. Advertising is done by companies engaged in pure competition, monopolistic competition, and oligopolistic competition. When companies charge prices for their goods above marginal cost, these companies need to advertise to compete for more buyers by attracting them or convincing them through advertising of the superiority of their products and services. Advertising has been criticized for making people buy something that they do not want. Critics claim that most advertising is psychological rather than informational. It manipulates people to buy. On the other hand, companies claim that advertising is used to provide information about their products. For more information, see Mankiw (2007).