A Project on Advertising in Contemporary Society.

Sub:- Role of advertising in Indian Economy.

Submitted by:Prit vin ! Rac Roll no. - "". #$%&& 'Advt(.

Role of advertising in Indian Economy )it respect to follo)ing points:*( Impact of +lobali,ation on India "( +ross -omestic Product .( %usiness cycle/ trade cycle 0( Competition 1( Price 2( Consumer 3elfare 4( Standard of living.

Impact on India: India opened up t e economy in t e early nineties follo)ing a major crisis t at led by a foreign e5c ange crunc t at dragged t e economy close to defaulting on loans. # e response )as a sle) of -omestic and e5ternal sector policy measures partly prompted by t e immediate needs and partly by t e demand of t e multilateral organisations. # e ne) policy regime radically pus ed for)ard in favour of amore open and mar6et oriented economy. &ajor measures initiated as a part of t e liberalisation and globalisation strategy in t e early nineties included scrapping of t e industrial licensing regime7 reduction in t e number of areas reserved for t e public sector7 amendment of t e monopolies and t e restrictive trade practices act7 start of t e privatisation programme7 reduction in tariff rates and c ange over to mar6et determined e5c ange rates. 8ver t e years t ere as been a steady liberalisation of t e current account transactions7 more and more sectors opened up for foreign direct investments and portfolio investments facilitating entry of foreign investors in telecom7 roads7 ports7 airports7 insurance and ot er major sectors. # e Indian tariff rates reduced s arply over t e decade from a )eig ted average of 4".19 in *::*-:" to "0.2 in *::2-:4.# oug tariff rates )ent up slo)ly in t e late nineties it touc ed .1.*9 in ";;*-;". India is committed to reduced tariff rates. Pea6 tariff rates are to be reduced to be reduced to t e minimum )it a pea6 rate of ";97 in anot er " years most non-tariff barriers ave been dismantled by marc ";;"7 including almost all <uantitative restrictions. India is +lobal: # e liberalisation of t e domestic economy and t e increasing integration of India )it t e global economy ave elped step up +-P gro)t rates7 ) ic pic6ed up from 1.29 in *::;-:* to a pea6 level of 44.=9 in *::2-:4. +ro)t rates ave slo)ed do)n since t e country as still bee able to ac ieve 1-29 gro)t rate in t ree of t e last si5 years. # oug gro)t rates as slumped to t e lo)est level 0..9 in ";;"-;. mainly because of t e )orst droug ts in t)o decades t e gro)t rates are e5pected to go up close to 4;9 in ";;.-;0. A +lobal comparison s o)s t at India is no) t e fastest gro)ing just after C ina. # is is major improvement given t at India is gro)t rate in t e *:4;>s )as very lo) at .9 and +-P gro)t in countries li6e %ra,il7 Indonesia7 !orea7 and &e5ico )as more t an t)ice t at of India. # oug India>s average annual gro)t rate almost doubled in t e eig ties to 1.:9 it )as still lo)er t an t e gro)t rate in C ina7 !orea and Indonesia. # e pic6 up in +-P gro)t as elped improve India>s global position. Conse<uently India>s position in t e global economy as improved from t e =t position in *::* to 0t place in ";;*. 3 en +-P is calculated on a purc asing po)er parity basis.

+lobalisation and Poverty: +lobalisation in t e form of increased integration t oug trade and investment is an important reason ) y muc progress as been made in reducing poverty and global ine<uality over recent decades. %ut it is not t e only reason for t is often unrecognised progress7 good national polices 7 sound institutions and domestic political stability also matter. -espite t is progress7 poverty remains one of t e most serious international c allenges )e face up to *." billion of t e developing )orld 0.= billion people still live in e5treme poverty. %ut t e proportion of t e )orld population living in poverty as been steadily declining and since *:=; t e absolute number of poor people as stopped rising and appears to ave fallen in recent years despite strong population gro)t in poor countries. If t e proportion living in poverty ad not fallen since *:=4 alone a furt er "*1million people )ould be living in e5treme poverty today. India as to concentrate on five important areas or t ings to follo) to ac ieve t is goal. # e areas li6e tec nological entrepreneurs ip7 ne) business openings for small and medium enterprises7 importance of <uality management7 ne) prospects in rural areas and privatisation of financial institutions. # e manufacturing of tec nology and management of tec nology are t)o different significant areas in t e country. # ere )ill be ne) prospects in rural India. # e gro)t of Indian economy very muc depends upon rural participation in t e global race. After implementing t e ne) economic policy t e role of villages got its o)n significance because of its uni<ue outloo6 and branding met ods. ?or e5ample food processing and pac6aging are t e one of t e area ) ere ne) entrepreneurs can enter into a big )ay. It may be organised in a collective )ay )it t e elp of co-operatives to meet t e global demand. @nderstanding t e current status of globalisation is necessary for setting course for future. ?or all nations to reap t e full benefits of globalisation it is essential to create a level playing field. President %us >s recent proposal to eliminate all tariffs on all manufactured goods by ";*1 )ill do it. In fact it may e5acerbate t e prevalent ine<ualities. According to t is proposal7 tariffs of 19 or less on all manufactured goods )ill be eliminated by ";;1 and ig er t an 19 )ill be lo)ered to =9. Starting ";*; t e =9 tariffs )ill be lo)ered eac year until t ey are eliminated by ";*1. +-P +ro)t rate: # e Indian economy is passing t roug a difficult p ase caused by several unfavourable domestic and e5ternal developmentsA -omestic output and -emand conditions )ere adversely affected by poor performance in agriculture in t e past t)o years. # e global

economy e5perienced an overall deceleration and recorded an output gro)t of ".09 during t e past year gro)t in real +-P in ";;*-;" )as 1.09 as per t e Economic Survey in ";;;-;*. # e performance in t e first <uarter of t e financial year is1.=9 and second <uarter is 2.*9. E5port and Import: India>s E5port and Import in t e year ";;*-;" )as to t e e5tent of ."714" and .=7.2" million respectively. &any Indian companies ave started becoming respectable players in t e International scene. Agriculture e5ports account for about *. to *=9 of total annual of annual e5port of t e country. In ";;;-;* Agricultural products valued at more t an @S B 2million )ere e5ported from t e country ".9 of ) ic )as contributed by t e marine products alone. &arine products in recent years ave emerged as t e single largest contributor to t e total agricultural e5port from t e country accounting for over one fift of t e total agricultural e5ports. Cereals 'mostly basmati rice and non-basmati rice(7 oil seeds7 tea and coffee are t e ot er prominent products eac of ) ic accounts fro nearly 1 to *;9 of t e countries total agricultural e5ports. 3 ere does Indian stand in terms of +lobal IntegrationC India clearly lags in globalisation. Dumber of countries ave a clear lead among t em C ina7 large part of east and far east Asia and eastern Europe. Eets loo6 at a fe) indicators o) muc )e lag. F8ver t e past decade ?-I flo)s into India ave averaged around ;.19 of +-P against 19 for C ina 1.19 for %ra,il. 3 ereas ?-I inflo)s into C ina no) e5ceeds @S B 1; billion annually. It is only @S B 0billion in t e case of India FConsider global trade - India>s s are of )orld merc andise e5ports increased from .;19 to .;49 over t e pat "; years. 8ver t e same period C ina>s s are as tripled to almost 09. FIndia>s s are of global trade is similar to t at of t e P ilippines an economy 2 times smaller according to I&? estimates. India under trades by 4;-=;9 given its si,e7 pro5imity to mar6ets and labour cost advantages. FIt is interesting to note t e remar6 made last year by &r. %imal Galan7 +overnor of R%I. -espite all t e tal67 )e are no) ) ere ever close being globalised in terms of any commonly used indicator of globalisation. In fact )e are one of t e least globalised among t e major countries - o)ever )e loo6 at it. FAs Amartya Sen and many ot er ave pointed out t at India7 as a geograp ical7 politicocultural entity as been interacting )it t e outside )orld t roug out istory and still continues to do so. It as to adapt7 assimilate and contribute. # is goes )it out saying even as )e move into ) at is called a globalised )orld ) ic is distinguis ed from

previous eras from by faster travel and communication7 greater trade lin6ages7 denting of political and economic sovereignty and greater acceptance of democracy as a )ay of life. Conse<uences: # e implications of globalisation for a national economy are many. +lobalisation as intensified interdependence and competition bet)een economies in t e )orld mar6et. # is is reflected in Interdependence in regard to trading in goods and services and in movement of capital. As a result domestic economic developments are not determined entirely by domestic policies and mar6et conditions. Rat er7 t ey are influenced by bot domestic and international policies and economic conditions. It is t us clear t at a globalising economy7 ) ile formulating and evaluating its domestic policy cannot afford to ignore t e possible actions and reactions of policies and developments in t e rest of t e )orld. # is constrained t e policy option available to t e government ) ic implies loss of policy autonomy to some e5tent7 in decision-ma6ing at t e national level.

+ross -omestic Product '+-P(

+ross -omestic Product '+-P(7 t e total value of goods and services produced in a country over a period of time. +-P may be calculated in t ree )ays: '*( by adding up t e value of all goods and services produced7 '"( by adding up t e e5penditure on goods and services at t e time of sale7 or '.( by adding up producersH incomes from t e sale of goods or services. Io)ever7 it is difficult to measure +-P precisely7 partly because every country as an unofficial economy7 often called a blac6 economy7 t at consists of transactions not reported to government. # ere is =.*9 gro)t in t e +-P every year in India. A remar6able c un6 of t is total +-P is contributed by t e advertising. # e advertising e5penditure in India in t e year *:=1 )as 1;; crores ) ic increased to *1:0* crores in t e year ";;1. A study conducted by Eintas &edia +roup said IEE spent t e biggest amount i.e Rs 222 crore on #J and print ads. #oday t e e5penditure spend on advertising as crossed ";7;;; crores. Still t is contributes only to a ;..09 of t e total +-P7 ) ic is far more less t an ot er developed and developing countries in t e )orld.

# e contribution of t e Service Sector is t e ig est ) ile calculating t e +-P. # e contribution of t e Service Sector is 0"97 follo)ed by t e &anufacturing Industry and Agriculture )it "29 and ."9 respectively. Advertising7 after t e %an6ing services contributes t e ma5imum to t e +-P of India. Advertising in a )ay7 elps indirectly in t e contribution of +-P. Advertising informs people about t e various products and services available in t e mar6et for t em and t us7 a demand is created. In t is )ay t e demand-supply c ain functions and it contributes to t e gro)t of t e +-P.Also7 )e pay ta5es ) enever )e buy products. # ese ta5es also contribute to t e gro)t of t e +-P. If a person as a salary of Rs. *;;;;7 e pays Rs. ."14 as ta5es K ..9 # us7 it is Advertising ) ic contributes to t e gro)t of t e

Competition in Advertising
Competition is t e act of striving against anot er force for t e purpose of ac ieving dominance or attaining a re)ard or goal. Competition in advertising is said to occur ) en a substitute product is available t at provides t e consumer )it similar utilities at a similar price. Advertising is an important catalyst for price and <uality competition. Advertising can put do)n)ard pressure on prices by spurring competition among competitive firms. Professional services li6e advertising ave an important role to play in improving t e competitiveness of an economy. # e disappearance of anti-competitive regulatory restrictions in t is sector )ould mean t at consumers could be offered more competitive and better-<uality services on advantageous terms. In most economic relations ips7 t ere are providers7 consumers7 and sometimes LmiddlemenL. 3 en providers compete7 its good ne)s for consumers7 and vice versa. Sometimes t e competitive battles become very eated7 particularly ) en providers see a lot of profit available from t e consumers. It>s not as usual for t e middle men to compete strongly7 probably because t ey benefit from eit er side raising t e sta6es. &any businesses fail7 eit er because t ey don>t ave a product t at can profitably meet a real customer need 'a failure of mar6et researc ( or t ey don>t promote t e product properly 'a failure of mar6eting(. An average person is e5posed to more t an *7;;; advertising messages every day7 but actively notices fe)er t an =; ads. Advertising e5penditures in ";;1 in all media totaled Rs.*1:0* crores. Ads in ne)spapers accounted for *:."9 of measured spending7 follo)ed by net)or6 #J '*4..9(7 maga,ines '*1.29(7 spot #J '*0.;9(7 yello) pages '**.:9(7 and cable/syndicated #J '**.:9(. Internet advertising no) accounts for about 1.;9 of spending. %y product category7 automobile producers )ere t e largest advertisers 'B*2 billion of measured media(7 follo)ed by retailing 'B*..1 billion(7 movies and media 'B2 billion(7 and food7 beverages7 and candies 'B2.; billion(. %everage alco ol producers ran6ed *4t 'B*.4 billion( and tobacco producers ran6ed ".rd 'B"=0 million(. # e competition e5ists ) en t e buyer can substitute one product for anot er. # e )illingness to substitute depends on factors suc as price7 price of substitutes7 <uality of t e products and t e degree to ) ic various products provide t e consumer )it e<uivalent services. Competition arises because t ere are many firms in a mar6et eac selling an identical product. Eac firm also pays identical cost to produce its products. Consumers )ant to buy t e product at t e lo)est possible price and it doesnHt matter ) ic firm produces t e product. -ue to t is immense competition t e firms cannot increase t e price of its products )it reference to t e competitors product. Any firm t at increases its price loses customers ) o s)itc to anot er firm producing t e same product at t e lo)er price. Eac firmHs product is a perfect substitute for any ot er firmHs product. ?irms cannot influence competitors and are forced to sell at a price t at just covers t e price of t eir production. Thus competition affects the prices of the products and makes it beneficial for the consumers. Increase in competition decreases profits. # ese profits are restored by reductions in t e number of firms in t e industry. Advertising is an alternative to price competition. 3 en price competition increases7

firms no longer need and can no longer afford t e same level of advertising e5penditures. Concentration increases in advertising-intensive industries7 but t e increase in concentration ta6es place over a longer period of time t an in industries )it relatively lo) levels of advertising. In industries t at spent a lot on researc and development7 t e rate of innovation7 bot as measured by RM- e5penditures and as measured by innovative output7 does not c ange as a result of t e increase in competition. %ut t e resulting increases in concentration in RM--intensive industries are <uite substantial. # e increase in t e number of firms coming up in t e mar6et producing almost similar product or service as lead to a strong competition because of ) ic t e firms tend to advertise more to ma6e t eir product 6no)n to a large number of people t us contributing remar6ably to t e +-P of t e country. # us competition in advertising forces t e firm to spend money to improve t e <uality of t e product to attract more consumers. Competition also elps t e consumers to get t e products and services at a lo)er price.

BUSINESS CYCLE
# e business cycle or economic cycle refers to t e ups and do)ns seen some) at simultaneously in most parts of an economy. # e cycle involves s ifts over time bet)een periods of relatively rapid gro)t of output 'recovery and prosperity(7 alternating )it periods of relative stagnation or decline 'contraction or recession(. %usinesses continue to reap gains from past investments in advanced tec nologies7 and ne) investments )ill 6eep t e river of economic benefits flo)ing for corporate profits and consumer living standards in t e coming years. # ere is no linear gro)t of an economy. IndiaHs gro)t in real +-P averages about 2-4 percent annually7 over t e years in t e ne) millennium. # e dynamic forces operating in t e capital economy creates various 6inds of business or economic fluctuations. Some are abrupt7 isolated and discontinuous ) ereas on t e ot er and some are continuous7 lasting for long periods of time in t e same direction ) ile some are r yt mic and recurring in nature. # us according to t eir typical c aracteristics7 fluctuation or movements in economic activity are commonly classified as '*( secular trends '"( seasonal fluctuations '.( cyclical fluctuations '0( random fluctuations eatures of a Business Cycle # e term Ntrade cycleO in economics refers to t e )ave-li6e fluctuations in t e aggregate economic activity7 particularly in employment7 output and income. # e business cycle or trade cycle refers to t e ups and do)ns seen some) at simultaneously in most parts of an economy. # e cycle involves s ifts over time bet)een periods of relatively rapid gro)t of output 'recovery and prosperity(7 alternating )it periods of relative stagnation or decline 'contraction or recession(. ?e) features of #rade Cycle )ort noting are '*( A trade cycle is a )ave li6e movement in economic activity in s ort term. '"( Cyclical fluctuations are recurrent in nature. '.( E5pansion and contraction in a trade cycle are cumulative in effect. '0( #rade cycles are all pervading in t eir impact. '1( A trade cycle is c aracteri,ed by t e presence of a crisis7 i.e.7 t e pea6 and troug are not t e symmetrical. '2( # oug cycles differ in timing and amplitude7 t ey ave a common pattern of p ases ) ic are se<uential in nature. '4( # ere are minor and major cycle7 periodicity of minor cycle is .-0 years and t at of a major cycle is 0-= years. '=( #rade cycles are r yt mic but t ey lac6 periodicity.

!hases of a Business Cycle. A trade cycle is commonly divided into four )ell-defined and inter-related recurring p ases: '*( Prosperity p ase '"( Recessionary p ase '.( -epressionary p ase '0( Recovery p ase # ese p ase are recurrent and follo) a regular se<uence7 ) ic means t at ) en prosperity ends7 recession startsA depression follo)s recession7 recovery follo)s depression7 prosperity comes after recovery and in turn gives )ay to recession. # us7 )e see t at eac p ase appears ) en t e immediately preceding p ase as run its course. It s ould be remembered t at no p ase as any definite periodicity or time interval.

!rosperity Prosperity is state of affairs in ) ic t e real income consumed7 real income produced and level of employment are ig or rising and t ere are no idle resources or employed )or6ers or very fe) of eit er. # e features of prosperity are i. a ig level of output and trade ii. a ig level of effective demand iii. a ig level of employment and income iv. a ig marginal efficiency of capital v. a price inflation vi. arising structure of interest rate vii. a large e5pansion of ban6 credit and overall business optimism

# e prosperity p ase comes to an end ) en t e forces favouring e5pansion becomes progressively )ea6. "ecession # e end of prosperity gives birt to recession. It is related to turning point more t an a p ase. It last relatively for a s orter period of time7 during t is time it mar6s t e point at ) ic t e forces t at ma6e contraction finally )in over t e forces of e5pansion. Ei<uidation in t e stoc6 mar6et7 repayment of ban6 loans and t e decline of prices are its out)ard symptoms. # e stoc6 mar6et is t e first to e5perience t e do)nfall as t ere is a sudden and violent c ange in t e prevailing atmosp ere. -uring recession7 income t roug out t e economy falls7 t is eventually result in t e decrease in t e aggregate e5penditure and t us t e general demand falls7 in turn7 prices7 profit and business decline. #epression # e c aracteristic of t is p ase is t at it is an overall curtailment of aggregate economic activity and its bottom. # is is t e most deplorable condition prevailing in t e economy. # e c aracteristic features of depression are t e reverse of prosperity. Some of t em are i. s rin6age in t e volume of output7 trade and transactions ii. rise in t e level of unemployment iii. price deflation iv. fall in aggregate income of t e community 'especially )ages and profits( v. fall in t e structure of interest rates vi. curtailment in consumption e5penditure and reduction in t e level of effective demand vii. collapse of t e marginal efficiency of capital and decline in t e investment demand function viii. contraction of ban6 credit7 etc. 8ptimism develops economic activity ) ic gat ers momentum. # us a stage recovery sets in. "eco$ery phase # e revival or recovery p ase refers to t e lo)er turning point at ) ic an economy undergoes c ange from depression to prosperity. 3it an improvement in demand for capital goods7 recovery sets in. 3 en t e demand for consumption goods rises or ) en t e capital stoc6 increases7 t e demand for capital goods )ill rise and ne) investment )ill be reduced. Suc induced investment )ill cause a rise in employment and income. # e increased income in turn )ill lead to a rise in consumption ) ic )ill pus up t e demand furt er investment7 employment and income. 8nce t e e5pansionary movement starts7 t is is o) it gat ers momentum.-uring t e revival period level of employment7 output and income slo)ly and steadily improves. # e )ave of recovery7 once initiated begins to feed upon itself. # us during recessionary period7 t e e5pansionary process )ill be self-reinforcing. # eoretically7 inflation corresponds )it e5pansion p ase and deflation )it contraction p ase of trade cycle.

Standard %f Li$in&
# e level of consumption t at an individual7 group7 or nation as ac ieved is 6no)n as standard of living. A relative inde5 to t e standard of living of a certain economic group can be gat ered from a comparison of t e cost of living and t e )age scale or personal income. Satisfaction of basic needs of food7 clot ing and s elter are all standard of living issues. It as been generally agreed t at advertising elps improve t e standard of living. -ue to a uge competition in advertising7 t e prices of t e products are lo) ) ic in turn improves t e level of standard of living of t e people in a country. Advertising spreads a)areness and passes information to t e consumer ) ic eventually increases t eir standard of living. %y stimulating gro)t in t e economy7 advertising increases productive use of resources7 increases employment levels7 improves )ages and t erefore may lead to better standard of living. # is is true only if t e e5penditure on advertising is offset by increased value of sales. Secondly7 advertising increases aspiration levels in society. Consumers become a)are of ne) products and services and aspire to enjoy t em. # e demonstrative aspect of advertising is tremendous. In India7 t e rural areas are fast becoming important consumption centers. 3rist )atc es7 radios7 s ampoos7 television sets and even air dyes are finding users amongst t e rural population. # is as been attributed to television advertising. ?inancial advertising as a crucial role to play in improving standards of living. #ill a fe) years ago7 Indians 6ept t eir savings eit er in t e form of gold7 estate or as ban6 deposits. # oug India as one of t e ig est rate of savings in t e )orld7 t e savings )ere c anneli,ed to buy p ysical assets and )ere not available for productive investment. # is as c anged for t e better since *:=1. ?inancial advertising as reac ed villages7 to)ns and cities and today farmers in t e interland invest in mutual funds7 EIC policies and unit trusts. +roups suc as Reliance ave so successfully used financial advertising to reac t e masses. # ese efforts improve t e real income of consumers as t eir investments bring ig er returns. # e natural outcome of suc efforts is an improvement .

Price
Pricing decisions are t e most complicated aspect of a companyHs mar6eting mi5. In t e modern competitive mar6et it is not possible to follo) a simple rule of cost plus profit margin7 ) ile fi5ing t e price of a product. &ore often t an not7 it )ill depend upon consumers e5pected response to different price levels and t eir perceived value of product <uality and utility. Price determines several ot er aspects of mar6eting mi5 for instance price influences advertising budget7 since t e product aving ig profit margin can afford to ave a larger ad budget. Price also affects t e basic appeal used in t e ad campaign. It influences media decisions. ?or e5ample Airtel introduced a ire-purc ase sc eme for lifetime connectivity. People could not afford to pay Rs:::/- at a go7 but t ey could afford Rs.:;/- per mont for a period spread over a year. # e sc eme )as publis ed t roug advertising and )as immensely successful. -oes eavy advertising e5penditure raise consumer pricesC # e <uestion is superficially7 a compelling one. # e ans)er is t at7 in some cases7 it doesA in ot er cases it does not. # e NlogicO be ind t e ans)er is simple. It involves ) at may be called t e stac6ing-up concept of costs. # e vie) is often eld t at all elements of production costs and mar6eting costs must be summed up and covered 'or recovered( in t e final selling price. All t ese costs accumulate in t is vertical or Nstac6ing- upO sense7 and )e end up by paying for eac layer of t e stac67 as it )ere. # e cost of advertising is seen as simply anot er element in t e stac67 and its elimination is vie)ed as tantamount to price relief for us all. 3e s ould note t at t is argument need not be applied only to t e individual advertisement or t e advertising campaign7 but to any promotional effort- trading stamps7 etc7 included. %ut in spite of t e seeming simplicity and clarity of t e logic of t is criticism7 a categorical statement t at advertising raises consumer prices is )rong. Advertising may result in ig er prices if it is ineffective7 or if it does not result in an increased sales volume7 even t oug mar6et saturation as not yet developed. 3e ave t ree instances in ) ic advertising raises consumer prices. P# e critic ) o claims t at advertising raises consumer prices presumes constant 'or increasing( unit costs of manufactureQ. # e t ree instances are: 'a( 3 en &ar6et Saturation E5ists: 3 en no amount of encouragement )ill entice ne)- buyers to try a particular product or service t at is7 ) en mar6et saturation occurs t en a battle bet)een competing firms )it a not- to- be outspend attitude clearly represents t e economic )aste. # is stand- of situation may result in losses to t e battling firms or in ig er prices to final consumers. 'b( 3 en decreasing returns to scale are encountered: In t is instance7 advertising may increase t e sales volume7 but it may not produce a lo)er unit cost of manufacture. 3 en t e cost of manufacture increases in t e sales volume 'called decreasing returns to sale(7 furt er advertising e5penditure must accumulate in t e vertical sense.

'c( 3 en t e advertising itself is ineffective: ?inally7 advertising may result in ig er prices if it is simply ineffective7 if it does not result in an increased sales volume7 even t oug mar6et saturation as not yet developed. # ese are t e t ree instances in ) ic advertising can increase consumer prices: but as long as a mar6et is e5pandable 'unsaturated(7 as long as lo)er manufacturing costs per unit are possible7 as long as t e advertising produces 'or elps to produce( an increased sales volume7 it is possible to lo)er unit costs. It is possible t en to ac ieve lo)er consumer prices.

Consumer 'elfare
Consumer )elfare refers to t e individual benefits derived from t e consumption of goods and services. Individual )elfare is defined by an individual>s o)n assessment of is/ er satisfaction7 given prices and income. # us Consumer )elfare is one t ing ) ic every manufacturer is concerned about. # is is so because it is the consumer who decides the life of the product on the shelf . Consumer )elfare is soug t not only by t e manufacturers7 but also by t e advertisers7 because t ey are t e face of t e manufacturer for t e consumers. ?or e5ample7 advertising t e benefits of fluoride in toot paste7 increased t e sales of fluoridated brands7 but it also reduced t e incidence of cavities7 )it benefits to consumers t an are surely greater t an t e gains to toot paste advertisers. Competitors can ma6e use of t e information as )ell. # e first firm in t e mar6et may need to e5plain7 for e5ample7 ) y fluoride is important. Subse<uent firms can ma6e use of t at information by advertising simply t at t ey ave fluoride too. # e result is lo)er prices7 better products7 and improved consumer )elfare. Advertising is po)erful7 not because it manipulates consumers7 but because t e competitive dynamic t at advertising sets in motion forces c anges t at benefit consumers. If )e loo6 at t e broader picture7 )e see t at t e consumer is benefited in bot t e cases. %e it t e price )ar or cartel among t)o brands or if competition arises. In t e price )ars7 t e consumers get to buy <uality products at c eaper prices. And7 in t e competition scenario7 t e consumer gets a )ide range to c oose from. # is dual advantage for t e consumers is seen in almost every product range. Anot er common e5ample )ould be cold drin6s7 c ocolates7 s ampoos and ot er )ide range of personal care products7 automobiles etc.