This is assuming products are priced based purely on cost rather than based off the market forces of supply and demand.

Or another way to look at this issue is if a company cut their advertising budget (as many did early in the pandemic) do they also follow through with a reduction in price? If not, why do we assume an increase in marketing budget means an increase in price?

> This is assuming products are priced based purely on cost

No, I never made such assumption.

> if a company cut their advertising ... do they also follow through

This is a strawman. The price point for a single product from a single company is subject to a million forces so nothing can be said. The behavior of an entire industry is a different thing and costs don't magically vanish.

This is like saying that if I heat up some water I cannot prove that each molecule changed behavior so heat transfer does not happen.

>No, I never made such assumption.

Sure you did. Your argument was that all (or at least all advertising) costs are passed onto the consumer.

>The price point for a single product from a single company is subject to a million forces so nothing can be said. The behavior of an entire industry is a different thing and costs don't magically vanish.

That logic goes both ways and basically eliminates any point in having this debate.

Have you stood in a shopping aisle at some point in your life, comparing the price of generic brand items with those brands that bombard you with ads every day?

Most people have. To them you might as well be proposing that the sky is a particular shade of red for all the time it'll take them to dismiss that thought.

That's a little bit different. The brand names demand higher prices because people desire them more. It's not a result of the cost of advertising, but of the effects of advertising.

The generic isn't cheaper because it didn't spend money on advertising, the generic is cheaper because if it were the same price as the brand name, you'd buy the brand name. It is my firm belief that Kraft (aka Mondelez) has been getting away with selling garbage products for at least a decade now just because the brand is so strong.

The differences between name brands and generic brands is not purely advertising. I will grant you most of the difference is marketing, but advertising is just one piece of what falls into marketing overall. There are plenty of brands that don't advertise and still have a strong and prominent brand identity. Sometimes not advertising even becomes an element of that brand identity.

In a working market, the cost of a good is very close to its cost.

>In a working market[1], the cost of a good is very close to its cost.

I would add a footnote in that comment.

[1] - A working market without large barriers to entry, information asymmetry, regulatory capture, monopolistic or oligopolistic companies, or basically anything else that deviates from the dozen or so different assumptions made in the "perfect competition" examples used in econ 101 classes that rarely exist in the real world.

I'm fully aware that markets don't actually work satisfactorily in practice.