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Advertising, Choice and Welfare

In: Consumer Choice in the Third World

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  • Jeffrey James

Abstract

There can be little doubt that the main purpose of advertising is to shift the demand curve faced by the individual firm to the right and to make it less elastic. If successful in achieving this objective advertising gives rise to a direct welfare effect on consumers. It is apparent from a number of empirical studies that, although the size of the shift in the demand curve may vary from one case to another, it cannot in general be dismissed as negligible. Advertising does indeed, therefore, pose a problem in welfare economics. As one recent study of the United Kingdom has put it: We did find evidence that advertising affects consumer choice at all levels. Of course, this tells us nothing about whether consumers’ choices are in some sense ‘better’ after advertising has taken place than before it. We merely conclude that it is not a question which can be easily escaped in a welfare analysis of advertising at any level of aggregation on the grounds of negligible advertising effects.1

Suggested Citation

  • Jeffrey James, 1983. "Advertising, Choice and Welfare," Palgrave Macmillan Books, in: Consumer Choice in the Third World, chapter 2, pages 28-43, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-06109-9_3
    DOI: 10.1007/978-1-349-06109-9_3
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