||The thesis called Microeconomic Theory of Advertising deals with advertising applying theoretical as well as empirical findings of microeconomics and marketing. The first part introduces advertising from the marketing theory point of view. It starts with a brief summary of marketing mix. The emphasis is placed on the advertising itself as one of the components of marketing activities and on the advertising media. The first part is ended up with an econometric model which aims to shed some light on the impact of various events on the amount of advertising expenditures. The second part interprets advertising using microeconomic tools; it examines the relation between advertising and demand, advertising and price of a good, etc. It aspires to answer questions related to advertising and its effect on consumer preferences, on firm profitability, on the size of market share, on output and employment, etc. The very end of the thesis focuses on determining the optimal advertising expenditures.