Describe the role which advertising plays in the various market structures.

2 Answers

pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

Posted on

In perfect competition, advertising plays no part.  The product being made is homogeneous and therefore there is no point in advertising.  Advertising would only raise a producer's costs and, since the producer is a price-taker, those costs could not be passed on to the consumer.

In monopolistic competition and in some instances of oligopoly, advertising is necessary.  It is needed in order to differentiate the product of one company from that of its competitors.  Each producer must try to demonstrate that its product is better than the others' products.

Many people might think that advertising is not important for a monopoly because consumer have to buy from that monopoly.  However, this is not completely true.  Consumers do still have the choice of buying or not buying so the producer may still want to advertise to create demand.  In the case of a government-granted and regulated monopoly, advertising can help to create goodwill in consumers and therefore make it more likely that the monopolist will continue to be favored by the government.

syamaladevi's profile pic

syamaladevi | Student, Undergraduate | (Level 2) eNoter

Posted on

The various types of marketing structures includes perfect competition,orice discrimination,oligopoly,monopolistic and monopoly structures. Advertising plays an important role in all these marketing structures.

In the past each individual agency offered a variety of marketing  services under a single roof, but now a days due to the rapid expansion of media industry since the mid 1980's through cable and digital channels etc., encouraged for the rise of many new agencies and it increased heavy competition in the markets. so each company is advertising their products importance through advertising and making the people to get the awareness of their products. adververtising helps a company to reach its targets.

In perfect competitive markets the consumers get the knowledge of a particular product through advertising by the firm since the same product is sold by many other firms.