Question

The concept of “market equilibrium” is defined as when the quantity of a commodity demanded is equal to the quantity supplied. Assume that the demand function and the supply function are both linear. How can good advertising affect market equilibrium? How can bad advertising affect market equilibrium?

Answer 1

Advertising affects consumers tastes preference in a very positive way, but and this results in increasing in Demand, but it doesn't mean that advertisement is free of cost, as advertising costs a lot of money to the firms, which advertise their products or service.Positive advertisement, which includes bright colour packaging and a coupon also, if it's attracts your perception, and improvise you to purchase that product or makes you think about the product, it means you are experiencing a change in your taste preference, ( In a poisive way,) and this results in increase in demand.

similarly if any product has a negative publicity or making bad comments on particular religion, race or color, it directly have a negative impact on consumers, and simultaneously they do not purchase the product from the company, and the market equilibrium curve goes down, marginal cost decreases, this type of effect is called as negative marketing effect or bad advertising.