and radio. The remaining third was divided between direct mail, magazines, telephone directory yellow pages, and

billboards. Mobile devices are increasing the opportunities for advertisers.

Advertising is all about explaining to people, or making people believe, that the products of one firm are

differentiated from another firm's products. In the framework of monopolistic competition, there are two ways to

conceive of how advertising works: either advertising causes a firm’s perceived demand curve to become more

inelastic (that is, it causes the perceived demand curve to become steeper); or advertising causes demand for the

firm’s product to increase (that is, it causes the firm’s perceived demand curve to shift to the right). In either case, a

successful advertising campaign may allow a firm to sell either a greater quantity or to charge a higher price, or both,
246 10 • Monopolistic Competition and Oligopoly

and thus increase its profits.
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