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Consumer Behavior Dependence Effects Summary Article Review Pro

.... Kenneth Galbraith challenges Keynes with the introduction of his Dependence Effect theory which states that wants depend on the process by which they are satisfied; welfare is not necessarily greater at higher levels of production. Under this theory consumers are never satiated because advertising and sales keep stimulating demand. Suppliers focus on manufacturing demand even more so than on manufacturing products.[1] While many believe Galbraiths analysis to be ridiculous, an examination of market structures, advertising expenditures, consumer behavior and the general welfare of the consumer suggest that Galbraiths theory does have merit.
Most firms are monopolistic competitors. There are several competing firms who supply goods, but, unlike perfect competition, they face a downward-sloping demand curve for their differentiated products. The perfect competitor in long-run equilibrium produces at a point where MC - P - ATC. At that point, ATC is at its minimum. On the other hand, a monopolistic competitor produces at the point, MC - MR. Increasing output will lower average cost. Therefore, monopolistic competitors make great efforts to increase their market share and do so by offering differentiated products in contrast to the perfect competitor with identical products that cause buyers to be indifferent to which sellers