commerce question

[pakisatan123]

does advertisement increases cost of production??6 marks.replyy

 

[koooldude]

It depends on how successful the advertising campaign is. If adverts are successful in increasing the demand of a product, the producer might expand his scale of production to meet the increase in demand. This way he might reap the advantages of large scale production i.e economies of scale ( lower average costs). However if an advertising campaign fails to increase sales, cost of production will rise and the producer might have to sustain losses.

 

[VelaneDeBeaute]

Initially it does - Yes! Success and failure of the ads come later on! I mean when first a company spends money on advertising, it'd have to spend on it! Later on, if the advertisement campaign is successful, the cost spent on advertising might be recovered! koooldude's answer explains the rest of it!