Marketing Begins with Economics Marketing Chapter 3.
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Transcript of Marketing Begins with Economics Marketing Chapter 3.
Warm-Up
Using the worksheet tell what you know about economics and what you want or need to learn about it. LEAVE the THIRD COLUMN Blank.
The Importance of Economic Understanding
The basic economic problemScarcity
Unlimited wants/needs with limited resources
Economic SystemA collection of laws, institutions and activities
that provide a framework for economic activity
Who makes the decisions?
Controlled (Command) economy government
Regulated economyShared between government and individuals
Free (Market) economyindividuals
America’s Private Enterprise Economy
Profit MotiveUse of resources toward the greatest profit for
the producers
CharacteristicsConsumers (demand)Producers (supply)Government (regulate)
Answer the following:
What if the U.S. Economy was strictly a free/market economy and not regulated by government? Predict how the lack of government regulations might affect the environment, consumers, and workers.
OBSERVING THE LAW OF SUPPLY AND DEMAND
SupplyQuantity of product the producer is willing and
able to provide for a price
DemandQuantity of products consumers are willing and
able to purchase for a price
What’s So Special About a Rose?
Gather therefore the Rose,Whilst yet is prime,
For soon comes age,That will her pride deflower;Gather the Rose of Love,
Whilst yet is timeEdmund Spenser
1552 - 1599
What’s in a name?
That which we call a rose
By any other name would smell as sweet
William Shakespeare
1564 - 1616
O, my Luve is like a red, red rose,
That’s newly spring in June.
O, my Luve is like a melodie,
That’s sweetly played in tune.
Robert Burns
1759 - 1796
Determinants of Demand
Number of ConsumersMore buyers = more demand
Consumer Tastes and PreferencesWhen this changes so will demand
Consumer IncomeMore income = more demand
Prices of Related Goods If the substitute has a better price the demand for the
other product will decreaseConsumer Expectations
When consumers expect something about the future it can change demand for a product
Demand Curve for Movies
Price
$10.50
9.00
7.50
6.00
4.50
3.00
1.50
1,000Quantity
2,000 3,000 4,000 5,000 6,000 7,000
Determinants of Supply
Number of Producers More producers = more supply
Resource Prices Higher cost of resources = less supply (unless they can make
the cost up in the increase of price)Technological Changes
Better productivity = more supplyPrices of other Products of the business
If one product’s price raises supply increases but could cause a decrease of supply of another product
Producer Expectation Expectations of future changes could decrease current supplies
Supply Curve for Notebook Computers
Price
$2,100
1,800
1,500
1,200
900
600
300
100Quantity
200 300 400 500 600 700 800
Market Price for Notebook Computers
Price
$2,100
1,800
1,500
1,200
900
600
300
100Quantity
200 300 400 500 600 700 800
DemandDemand SupplySupply
Macroeconomics
MacroeconomicsMacroeconomics studies the economic behavior and relationships of the entire society.
Microeconomics
MicroeconomicsMicroeconomics is the study of relationships between individual customers and producers.
Warm-Up
Why is an understanding of economics more important to marketing now than it was in the past?
All-Out Competition or No Competition At All
Pure competitionLarge number of suppliers offering very similar
products
MonopolyOne supplier offering a unique product
Between the Extremes
OligopoliesFew businesses offering very similar products
Monopolistic competitionMany firms competing with products that are
somewhat different
Understanding the competitionMust know what type of competition to
maximize profits
Utility Means Satisfaction
Economic utility Economic utility (the amount of satisfaction a (the amount of satisfaction a consumer receives from the consumption of a consumer receives from the consumption of a product)product)
Form utility – changes in tangible parts of product
Time utility – available when customer wants it
Place utility – available where the customer wants to buy it
Possession utility – affordability of the product