zlacker

Not necessarily, cost reductions can increase, decrease or have no effect the total expenditure on goods. The total effect is quite ambiguous depending on the income and substitution effects.

>>spaceb+(OP)
I agree. I've always heard "charge what the market will bear."

Why would a reduction in advertising costs equate to lower consumer pricing — if there's a better margin to be had instead?

>>aesh2X+A7
Because for most products brand fidelity isn't keeping competition away. Higher than necessary margin does not last long in a competitive market.

>>hirako+ly1
Good point. That can be true if two competitors are competing on price as a primary factor. Price might not be the biggest factor, however, and improving the margin would be attainable in that gap.