Supporters of advertising reply to the objection that it adds to cost. According to them, the per unit cost of production comes down because:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → increased demand leads to higher production, which brings economies of scale
Option (1) the overall cost of advertising gets spread over numerous communication links — Incorrect. This is the economy merit. Wide reach spreads the total cost of advertising, so the cost of reaching each person is low. It is about the per-unit cost of reach, while the question is about the cost of production.
Option (2) buyers make their purchase decisions on factors such as price, style and size — Incorrect. This is the supporters’ reply to “confuses the buyers”. Buyers are rational and decide on price, style and size.
Option (3) increased demand leads to higher production, which brings economies of scale — Correct. Advertising raises the demand for the product. Higher demand leads to higher production, which brings economies of scale. The total cost is divided over a larger number of units, so the per unit cost of production comes down.
Option (4) buyers come to know about new products, which may be improvements over existing ones — Incorrect. This is the reply to “undermines social values”. Advertising tells buyers about new products, which may be better than the existing ones.
NCERT (2026-27 Edition): “1. Adds to Cost: … True, advertisement of a product costs lot of money but it helps to increase the demand for the product as large number of potential buyers come to know about the availability of the products, its features, etc. and are persuaded to buy it. The increased demand leads to higher production, which brings with it the economies of scale. As a result, the per unit cost of production comes down as the total cost is divided by larger number of units. Thus, the expenditure on advertisement adds to the total cost but the per unit cost comes down, which in fact lessens the burden of consumers rather than adding to it.” |