Question

Explain why price advertising typically lowers prices and increases consumer welfare

Answer 1

Generally price advertising refers to the visual display of products on TV, internet,newspapers, banners etc or announcement on radio of a paricular product with its price below the normal price which entice people too make purchase of the product more than they need. Price advertising generally provides the information of the product along with its quality which raises the elasticity of demand by increasing awareness among consumers about a particular band. Mostly Price advertisisng are considered as the best pursuasive method of marketing as it easily reaches to the consumers via different mediums which attracts more consumers for a product when the price of a particular product is sold at a lower price than its general price. Increase in elasticity of demand with the help of price advertising makes firms to reduce the mark up cost of that product over marginal cost which brings down the final product cost of the product and more and more consumers can afford for the product which increase consumer welfare.