Economics 101- Essay

By Victoria Luxford
Student # 30322T
 Does Marketing and Advertising have a important role in Supply and
Demand ?
Or does factors such as a Consumers Demographics have more of a
influence ?

The role of Advertising and Marketing have an important affect on supply and
demand of certain products as they can create consumer knowledge about
product benefits and can satisfy consumer perceptions of reality ( Galbraith,
1958) . As important as Advertising and Marketing are to the supply and demand
curve other factors such as the demographics of a consumer also have a very
influential role into how the supply and demand curve can change. Factors such
as family size ,occupation ,income and age all have an enormous influence over
how the consumer purchases. Therefore resulting in the level of demand needed
by consumers influencing in how much suppliers supply to meet the market.

“The basic laws of supply and demand state that the more there is of a product,
then the lower the price will be, and in return more will be sold. If the supplies
are low, then the prices will rise and demand for the product will tend to drop.
Some products are kept in low supply so as to keep their prices high, similarly
some products will flood the market cheaply so as to sell a lot” (Dambrath,2009).
This statement highlights the basic supply and demand model ,and in both cases
supply and demand would be affected initially by the research into
demographics of the consumer then the advertising and marketing would act as
a secondary motion to reinforce the consumer to purchase. Firms today are more
interested in the manufacture of demand of the product ,opposed to the
manufacturing of the actual product. Using advertising as a source of information
and persuasion both passively and actively ,firms create the wants they seek to
satisfy . Therefore economics has changed based on how consumers perceive
goods which will alter supply and demand .This alteration of the consumer could
be from the social standards that we have in society today as we “evaluate people
by the products they possess”(Galbraith, 1958). Particularly each person varies
on each need and want , as each person has different ways that their society has
taught them to satisfy these “needs”.

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Firstly the demographics of the individual consumer can be segmented in many
different categories such as geographics (where they live), income, occupation,
lifestyle, family size, culture , religion , age etc. These variables are very
important in distinguishing the different consumers in different markets which
will then indicate through their buying process , the supply and demand of that
particular product (Perner ,2010). This can also indicate certain shifts in the
demand as income , price related goods, tastes , expectations and number of
buyers are all variables that advertisers and marketers have to watch in order to
have a successful product that is realistic within supply and demand (Gans, King,
Stonecash, Mankiw, 2009).
Negatively however in certain situations, changes to supply and demand can be
due to changes in the amount of labor available in order to make the product. If
there is a labor shortage, or raw materials used to make the product become
scarce, then supply will drop. As a result demand for the product will force the
prices to become higher, in order to make sure all the companies costs are met. A
good example of this is that the price of rice has almost doubled in the last few
years due to less of it being successfully grown . Therefore this can influence
advertising and then ultimately shift demand .

Furthermore influencing this point on the demographic influence of supply and

demand “ …the world is in the midst of a major demographic transition. Not only
is population growth slowing, but the age structure of the population is changing,
with the share of the young falling and that of the elderly rising. Different
countries and regions, however, are at varying stages of this demographic
transition. In most advanced countries, the aging process is already well under
way, and a number of developing countries in east and southeast Asia and
central and eastern Europe will also experience significant aging from about
2020. In other developing countries, however, the demographic transition is less
advanced, and working-age populations will increase in the coming
decades”(World Economic Outlook , 2004). This variable of age in the
demographic effect will have a huge effect on supply and demand as there will
be a higher demand for elderly persons products and less of a demand for
young /adolescent products .Therefore leads on to my next point , if this variable

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of age affects the market like this then marketers and advertisers use
information to produce certain products.
Factors that can have an effect on this process is that organizations through
advertising and marketing can persuade consumers to buy there goods as it is
superior to any other related good and must be bought because of the benefits
thus increasing demand, for example in our case of our aging population that
may be walking sticks /aids. This is extensively elaborated on in a book ‘ The
Affluent Society’ (Galbraith ,1958) ,where it states “more goods will satisfy more
wants”. Galbraith implies that in modern economics ,the production of goods
creates wants and that the desire for wants creates the production of goods. By
stating that the process of satisfying wants creates other wants , which proves
how demands increase as economics grow, due to organizations and their
ongoing supply product. Further more it is proven that in economy eighty
percent of cases (Meisal ,1979) demand drives the supply. Initially when a
product is launched, because of supply some customers may opt to buy it. But all
further sales would happen only when there is a demand for the product. Only
when there is a demand for a product, the shop owners would buy them, the
stockist’s would sell them and the manufacturers would make them.
Furthermore, it is through manipulation used by firms through marketing and
advertising that alter consumer tastes to suite the firm’s product and inevitably
alter consumer wants.
“A new consumer product must be introduced with a suitable advertising
campaign to arouse an interest in it. The path for an expansion of output must be
paved by a suitable expansion in the advertising budget” (Galbraith ,1958). From
this statement it can be suggested that advertising only adjusts or has an effect
on the supply and demand curve when extensive research as been done on the
consumer (such as research to demographic segmentation) and only then will
advertising prove to be effective and then suppliers can act upon demand with
supply, “Consumers wants ultimately control the output produced…consumers
tend to quickly influence the sorts of good produced” (Mishan, 1967).

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To finish Marketing and Advertising along with consumer demographics is a
important sector into the shifts of supply and demand . Both these variables are
critical in the movement of the economic market that will be forever be changing
according the theory that has been executed. As long as marketers and
advertisers research the demographic segment of their market their will be
always be a supply that has to meet the consumer demand in order to be
successful.

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 Reference List
 Dambrath ,2009, How Supply and Demand affect Prices, viewed
1/10/10,<http://www.bukisa.com/articles/48799_how-supply-and-
demand-affect-prices>
 Galbraith,J.K.,1958. The Affluent Soceity .Harondsworth:Penguin Books
,pp.125-145
 Gans, J, King,S, Stonecash,R, Mankiw,N.G, 2009 ,Principles of Economics,
Cengage Learning, South Melbourne
 Meisel,J,1979, Demand and Supply Determinants of Advertising Intensity
among Convenience Goods , Southern Economic Journal , Vol.46, Issue no.
1, Pg 233-243
 Mishan, E.J,1967, The Costs of Economic Groth , Published by Praeger,
Canada
 Perner, L,2010, Consumer Behaviour :The Psychology of Marketing ,
viewed 2/9/10,http://www.bukisa.com/articles/48799_how-supply-
and-demand-affect-prices
 Unknown Author , 2004, Chapter III: how will demographic change affect
the global economy ?, 2/9/10,
<http://www.allbusiness.com/government/513074-1.html>