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A market economy is an economic system based on the voluntary cooperation of individuals on direct links between independent businesses and consumers through the free sale of goods. Goldman emphasizes on the fact that such a natural exchange of supply and demand appeals to customers’ needs and, therefore, attracts higher profits (Goldman, p. 259). The pursuit of creating a higher demand and enhancing supply generates progress and technological development, thus, stimulating the economy in general. For instance, higher demand will make the production of goods more profitable, and its manufacturers will increase output. According to Goldman, entrepreneurs’ primary motivation is to increase volumes of production and cut the initial costs, which can lead to more profit in the future (Goldman, p. 259). A market economy is also characterized by freedom of choice by consumers, entrepreneurs, employees, and the goods and services to be purchased. It means that customers’ free choice ultimately determines what and how much the economy should produce.
Advertising leads to the growth of demand by stimulating sales, and, therefore, plays a significant role in the turnover of goods, services, and production. The high living standards of developed economies are based on a mass-production system, which, in turn, is entirely dependent on a mass marketing system. As a result, it is possible to state that advertising contributes and profoundly influences the economy, its development, and its role in society. For instance, according to Goldman, advertising also positively affects the development and production of new types of goods and services, leads to innovational ways of improving products, and has effective ways of reporting to consumers about their usage, appearance, price, and availability (Goldman, p. 260). Following this impact, advertising may help to attract funds, investments, and various technologies for the development of production. Furthermore, based on customers’ feedback, advertising can improve the overall quality of goods and services, and expand the possibilities of consumer choice.
Additionally, as stated above, advertising provides consumers with information about a product or service. Therefore, producers should know the basic needs of consumers to satisfy them, and also have a conception of consumers’ buying ability, such as whether the customers can buy a particular product, or which feature of the product will be seen as the most desirable and wanted. Thus, customers can make the best purchase decision (Goldman, p. 260). In turn, manufacturers, when introducing new goods or services to the market, are responsible for providing themselves with adequate means of communication with consumers to find out their needs through their feedback, such as complaints and reviews. Unfortunately, there are still cases of misleading information, deceiving, harassment, and fostering insecurities in the advertising industry.
The process of creating and developing brands is highly influenced by advertising, as it has a particular impact on market competition as a whole. Intensive advertising investments in some sectors of the mass goods or services market provide the basis for customer loyalty to a limited number of brands. They, therefore, pose a severe barrier to competitors, as this limits customers’ demand on the market. Goldman states that advertising should be morally responsible and correct, as it creates desires and needs for the general public that can result in being harmful and morally unaccepted (Goldman, p. 263). Advertisements should be honest, valid, and state explicit factual claims about a specific product for customers to make a rational decision. Despite advertising being a key element in promoting goods or services to the market, it is crucial to ensure that advertisers take full responsibility for their products, appeal, and influence on the public, and not just try to gain corporate profit (Goldman, p. 264). Nevertheless, without advertising at all, marketing efforts to elicit the desired response from the target market will not have a logical conclusion and the desired effectiveness.
Reference
Goldman, A. The Justification of Advertising in a Market Economy. (259-264)
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