Download Marketing Begins with Economics

MARKETING BEGINS
WITH ECONOMICS
3.1
3.2
3.3
3.4
Scarcity and Private Enterprise
Observing the Law of Supply and Demand
Types of Economic Competition
Enhancing Economic Utility
© South-Western Publishing
SCARCITY AND
PRIVATE ENTERPRISE
GOALS for Lesson 3.1
Identify the basic economic problem.
 Describe how America’s private
enterprise economy works.
© South-Western Publishing
The Importance of
Economic Understanding
 The basic economic problem– scarcity
(unlimited needs and wants, combined with
limited resources)
 Who makes the decisions?
 Controlled economy—government (Cuba?)
 Regulated economy—shared (between gov’t. and
other groups or individuals)
 Free economy—individuals (no gov’t. regulation)
 Mixed economy—shared by government and
private enterprise (us?)
© South-Western Publishing
America’s Private
Enterprise Economy
Characteristics
 Resources of production are owned and
controlled by individual producers
 Producers use the profit motive in deciding
what to produce
 Consumers want to satisfy a need
 Consumers use value in deciding what to
consume
VALUE vs. PROFIT MOTIVE
(gov’t. only involved if harm possible)
© South-Western Publishing
America’s Private
Enterprise Economy
Consumers – limited resources to
satisfy needs
 Demand – the relationship between the
quantity of a product consumers are willing
and able to buy at a certain price
 Gather information and conduct research
© South-Western Publishing
America’s Private
Enterprise Economy
Producers – sell products and service
to consumers for a profit
 Supply – the relationship between the
quantity of a product that producers are
willing and able to provide at a price
 Research consumer wants and needs
© South-Western Publishing
OBSERVING THE LAW OF
SUPPLY AND DEMAND
GOALS for Lesson 3.2
Explain microeconomics and concept of
consumer DEMAND.
Identify factors that affect SUPPLY and
its relationship to DEMAND.
© South-Western Publishing
Macroeconomics
Macroeconomics studies the economic
behavior and relationships of the entire
society.
© South-Western Publishing
Microeconomics
Microeconomics is the study of
relationships between individual
customers and producers.
© South-Western Publishing
Question
Why is it more beneficial for
marketers to study the
microeconomics rather than
macroeconomics?
Give specific examples.
© South-Western Publishing
Microeconomics and
Consumer Demand
 Factors affecting demand
 If a need or want is particularly important or strong
 Available supply of product/service to satisfy
consumer needs
$P
 Availability of alternatives
 Analyzing demand curves
 Demand curve
 Law of demand
 Price increases, fewer buy
Q
 Economic market
 All the consumers who will buy a product/service.
© South-Western Publishing
Demand Curve for Movies
Price
$10.50
9.00
7.50
6.00
4.50
3.00
1.50
1,000
Quantity
2,000
3,000
4,000
5,000
6,000
7,000
© South-Western Publishing
Supplying the Product
 Several factors that influence what and how
many products or services a business will
produce.
 Profit
 Handling the competition (amount and type of)
 Use resources available to develop products and
services (economic resources)
 Analyzing supply curve
 Supply curve (relationship between P and Q)
 Law of supply (price up, produce more) (down, less)
© South-Western Publishing
Supply Curve for Watches
Price
$105
90
75
60
45
30
15
10,000
Quantity
20,000
30,000
40,000
50,000
60,000
70,000
80,000
© South-Western Publishing
Intersecting
Supply and Demand
Supply
Demand
Market price (or equilibrium
price)…THE PRICE AT WHICH
SUPPLY MEETS DEMAND!
© South-Western Publishing
Demand Curve for
Notebook Computers
Price
$2,100
1,800
1,500
1,200
900
600
300
100
Quantity
200
300
400
500
600
700
800
© South-Western Publishing
Supply Curve for
Notebook Computers
Price
$2,100
1,800
1,500
1,200
900
600
300
100
Quantity
200
300
400
500
600
700
800
© South-Western Publishing
Market Price for
Notebook Computers
Price
Demand
Supply
Equilibrium’
Price (or Market Price)
$2,100
1,800
1,500
1,200
900
600
300
100
Quantity
200
300
400
500
600
700
800
© South-Western Publishing
In Groups
Using Newspapers, find one specific
example for each of the factors that
affect demand, 1. convenience or
availability, 2. supply, 3. availability of
alternatives
 Example – 5 cell phone offers in one
Sunday newspaper might cause
consumers to wait and research the best
value.
© South-Western Publishing
TYPES OF ECONOMIC
COMPETITION
GOALS for Lesson 3.3:
Define pure competition and monopoly.
Explain the characteristics of oligopolies
and monopolistic competition.
© South-Western Publishing
All-Out (PURE)
Competition…
Pure competition – large # of
SUPPLIERS, offering similar products.
 Businesses have no control over prices
(one supplier can’t raise (control) price)
 See figure 3-6 (2 slides from now)
 Examples: ag. products, milk, blank CD’s
 Horizontal demand curve
D
© South-Western Publishing
… or No Competition At
All (MONOPOLY)
Monopoly
 One supplier! Unique product!
 Consumer Must accept price! – NO
COMPETITION!
 Gov’t. usually controls…like utilities! Or
cable TV!
 Vertical demand curve
D
© South-Western Publishing
Demand Curve for One
Company in Pure Competition
Price
Any
thoughts…comments?…
Quantity
© South-Western Publishing
Demand Curve for a Monopoly
Price
Quantity Is Microsoft a monopoly? How bout diamonds?
© South-Western Publishing
Between the Extremes
Oligopolies (such as the airline industry)
 Def. = few (?) businesses, similar products
 IF those few cooperate, they can act like a
MONOPOLY
 IF those few compete, they can act like PURE
COMPETITION
 Auto manufacturers, computer manufacturers, taxis,
movie theaters, banks, hospitals
© South-Western Publishing
Demand Curve for One
Company in an Oligopoly
Price
Quantity REASON: one company cannot really
influence pricing
© South-Western Publishing
Demand Curve for the
Industry in an Oligopoly
Price
Quantity Similar to monopoly…especially if the
few businesses cooperate!
© South-Western Publishing
Monopolistic
competition
– many firms, somewhat different
product. (most common form of bus.)
 Most retailers
 Businesses have little price control
 Almost flat (horizontal) demand curve
 Consumers have several choices – some
have major differences, some minor.
 Examples: restaurants, malls, shoes, cosmetics
© South-Western Publishing
Demand Curve for Monopolistic
Competition with Few Product Differences
Price
Quantity
© South-Western Publishing
Demand Curve for Monopolistic Competition
with Greater Product Differences
Price
Quantity
© South-Western Publishing
Understanding the
competition
FIRST! Read “elasticity of demand” on
p. 73
Marketers want to be different, and
better = more control of price in the
marketplace.
© South-Western Publishing
ENHANCING
ECONOMIC UTILITY
GOALS for Lesson 3.4
Define various types of economic utility.
Explain how marketers use utility to
increase customer satisfaction.
© South-Western Publishing
Utility Means Satisfaction
Economic utility – the amount of satisfaction
a consumer receives from the
consumption of a particular product or
service. Businesses try to increase utility
to improve the likelihood of consumer
purchase/consumption.
 Form utility
 Time utility
Read on p. 75-76
 Place utility
 Possession utility
© South-Western Publishing