What Is The Economic Impact Of Advertising?

A comprehensive article on the economic impact of advertising can be found at FlatWorldKnowledge. It explains the economic effects of advertising in great detail, whereas we will give a brief outline here.

• Consumers

Consumers are being constantly bombarded with adverts in the hope that they will choose the advertised products. Their spending puts money into the economy. At the same time, advertising negatively affects consumers, because rising advertising costs are pushing up prices.

• Businesses

Businesses are putting money into the economy by paying for the advertising. The resulting sales improve profits, which make it possible for businesses to invest. They expand, need more staff and consequently create more jobs, which means fewer unemployed and more people with money to spend.

Competition is fierce, so businesses have to keep stepping up their advertising campaigns. If they are not good enough and fail to do the job of attracting customers, a business could make huge losses. These losses will either result in price rises, which will curb customer spending; or in people having to be laid off. More unemployed, less people with money to spend.

• Advertising and Economy

Advertising has therefore a constant impact on the economy of a country. First of all, huge sums are being put into the economy through the money spent on advertising.

Secondly, the quality of adverts can either drive the economy to flourish by creating a thriving market environment; or it can cause the market to stagnate and subsequently create a situation where the economy begins to falter.

Money that is being spent on and as the result of advertising is continually being circulated throughout the economy by investments, more advertising, and hopefully more spending. The effect of advertising on the economy is very finely balanced and can swing into either positive or negative very quickly.

Advertising is a communication process whose purpose is to inform the potential customers about products and services and how to use them. If the advertising is positive and effective, it plays a significance role in the economy. But if it is the other way round then the economy suffers at large. It depends no the type and effectiveness of the advertisement.

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