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1 CHAPTER 3 MARKETING BEGINS WITH ECONOMICS 3-1 Scarcity and Private Enterprise 3-2 Observing the Law of Supply and Demand 3-3 Types of Economic Competition 3-4 Enhancing Economic Utility Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 2 ©MORGAN STANLEY Focus Questions: Does the use of a Chinese language headline increase or decrease your interest in the advertisement? What is the key message Morgan Stanley is trying to communicate? Offer examples of how the growth of the economies in other countries around the world affects U.S. businesses and consumers. Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 3 3-1 SCARCITY AND PRIVATE ENTERPRISE GOALS Identify the basic economic problem. Describe how America’s private enterprise economy works. Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 4 The Importance of Economic Understanding The basic economic problem Who makes the decisions? Controlled economy—government Free economy (market economy) — individuals Mixed economy—government and private enterprise Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 5 America’s Private Enterprise Economy Characteristics Consumers Producers Government Economic forces Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 6 3-2 OBSERVING THE LAW OF SUPPLY AND DEMAND GOALS Explain microeconomics and the concept of consumer demand. Identify factors that affect supply and its relationship to demand. Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 7 Macroeconomics Macroeconomics studies the economic behavior and relationships of an entire society. Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 8 Microeconomics Microeconomics is the study of relationships between individual customers and producers. Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 9 Microeconomics and Consumer Demand Factors affecting demand Analyzing demand curves Demand curve Law of demand Economic market Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 10 Demand Curve for Movies Price $10.50 9.00 7.50 6.00 4.50 3.00 1.50 1,000 2,000 Quantity Chapter 3 3,000 MARKETING 4,000 5,000 6,000 7,000 © 2009 South-Western, Cengage Learning 11 Supplying the Product Handling the competition Analyzing supply curve Supply curve Law of supply Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 12 Supply Curve for Cell Phones Price $105 90 75 60 45 30 15 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 Quantity Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 13 Intersecting Supply and Demand Supply Demand Market price Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 14 Demand Curve for Notebook Computers Price $2,100 1,800 1,500 1,200 900 600 300 100 200 Quantity (in 000s) Chapter 3 300 MARKETING 400 500 600 700 800 © 2009 South-Western, Cengage Learning 15 Supply Curve for Notebook Computers Price $2,100 1,800 1,500 1,200 900 600 300 100 200 Quantity (in 000s) Chapter 3 300 MARKETING 400 500 600 700 800 © 2009 South-Western, Cengage Learning 16 Market Price for Notebook Computers Price $2,100 Demand Supply 1,800 1,500 Market Price 1,200 900 600 300 100 200 Quantity (in 000s) Chapter 3 300 MARKETING 400 500 600 700 800 © 2009 South-Western, Cengage Learning 17 3-3 TYPES OF ECONOMIC COMPETITION GOALS Define pure competition and monopoly. Explain the characteristics of oligopolies and monopolistic competition. Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 18 All-Out Competition or No Competition At All Pure competition Monopoly Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 19 Demand Curve for One Company in Pure Competition Price Quantity Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 20 Demand Curve for a Monopoly Price Quantity Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 21 Between the Extremes Oligopolies Monopolistic competition Understanding the competition Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 22 Demand Curve for One Company in an Oligopoly Price Quantity Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 23 Demand Curve for the Industry in an Oligopoly Price Quantity Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 24 Demand Curve for Monopolistic Competition with Few Product Differences Price Quantity Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 25 Demand Curve for Monopolistic Competition with Greater Product Differences Price Quantity Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 26 3-4 ENHANCING ECONOMIC UTILITY GOALS Define four types of economic utility. Explain how marketers use utility to increase customer satisfaction. Chapter 3 MARKETING © 2009 South-Western, Cengage Learning 27 Utility Means Satisfaction Economic utility Form utility Time utility Place utility Possession utility Chapter 3 MARKETING © 2009 South-Western, Cengage Learning