Download Marketing and Economics

Chapter 3
Marketing Begins With
Economics
Scarcity and Private Enterprise

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Identifying the basic economic problem
How our private enterprise economy works.
Understanding Economics
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Creativity fuels effective marketing methods
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Generating the customer’s awareness.
Effective marketing relies on the principles
and concepts of economics.
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How simple decisions are made.
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Understanding your competition helps improve
decision making skills.
Basic Economic Problem
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Unlimited wants and needs of the
consumer.
Not enough resources to satisfy the needs
and wants of the consumer.
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Scarcity
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How will limited resources be used to satisfy
people’s wants and needs?
Trade-Off or Opportunity Cost
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Something equal value or the next best
alternative.
Decision Makers
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Who actually makes the decisions?
Economic Systems:
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Controlled Economy
 Government Controlled
Traditional Economy
 Doing things how they have always been done.
Market Economy
 Private Ownership
Mixed Economy
 Combines controlled and market economy.
Private Enterprise System

Based on independent decision by a
businesses and/or a consumers with only a
limited government role regulating those
relationship.
Characteristics
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Resources are owned by the individual.
Use of profit motive to generate more profit.
Consumers purchase goods that will satisfy
their needs.
Consumers use value in deciding what to
consume.
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Demand
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Supply
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What the consumer is willing to buy?
$ =
Demand
What the producer is willing to produce?
$
=
Supply
Government

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Allows consumer and producers to make decisions without any
interference.
Ensure equal treatment by enforcing laws and regulations.
Economic Forces

Decision-Making Process in a Private
Enterprise System determines how a
market operates.

See a need for a business opportunity,
pursue that opportunity.
Economic Resources
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4 Factors of Production:
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Natural: Comes from the earth
Labor: Human action involved in producing
goods and services.
Captial: Building, Equipment, etc…
Entrepreneurial: Idea for a product or service.
Types of Economic Conditions
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Define competition and monopoly.
Identify the characteristics of oligopolies
and monopolistic competition.
All In….or Not
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Competition affects consumers and
suppliers alike…
Excessive competition limits increase in
prices
Two characteristics to determine economic
competition:
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Number of firms competing in the market
Similarity between the products
Pure Competition
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Large number of suppliers offering very
similar products.
Price
Quantity
Monopoly
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One supplier offering a unique product.
Price
Quantity
Monopoly
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Government attempts to control any
business to maintain their products at a
reasonable price.
Between the Extremes
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Oligopoly
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Few businesses offer very similar products and
services.
Competitive market gives the consumer a
choice about what they want.
Oligopolies

One business in an oligopoly will have little
influence over the price it can charge.
Price
Quantity
Oligopolies

When there are a few firms in an oligopoly,
the total industry has much more control
over price.
Price
Quantity
Monopolistic Competition

Many firms competing with products that
are somewhat different.
Monopolistic Competition with few
differences amongst products.
Price
Quantity
Great product differences, businesses
have much more control over prices.
Price
Quantity
Understanding Competition
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Businesses in pure competition will not be
able to exercise much control in the market.
Marketers will look for ways to differentiate
a product similar to the competitions.
Enhancing Economic Utility

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Define types of economic utility
Explain how marketers use utility to
increase customer satisfaction.
Utility = Satisfaction
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Economic Utility:
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Amount of satisfaction a consumer receives from
the consumption of particular products or
services.
Types of Utility
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Form Utility:
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Time Utility:
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Making the product or service available when the
consumer wants it.
Place Utility:
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Change in the tangible part of a product or services.
Where the product and services is available.
Possession Utility:
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Affordability of the product or service.