Advertising and Welfare

In the previous chapter, we saw that approximately 2% of GDP is spent on advertising each year. For most of us, it is impossible to escape advertising, as it is found on television and radio, in movie theaters, and on the Internet. Advertising spending is especially prominent in consumer goods industries. The advertising-to-sales ratio exceeds 10% in many consumer goods industries, including liquor, perfume, and cosmetics, but is less than 1% in most producer goods industries, such as cement and industrial materials.