Transcript Marketing Begins with Economics

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 problem
Scarcity
Unlimited wants/needs with limited resources
Economic System
A collection of laws, institutions and activities
that provide a framework for economic activity
Who makes the decisions?
Controlled (Command) economy
government
Regulated economy
Shared between government and individuals
Free (Market) economy
individuals
America’s Private Enterprise Economy
Profit Motive
Use of resources toward the greatest profit for
the producers
Characteristics
Consumers (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
Supply
Quantity of product the producer is willing and
able to provide for a price
Demand
Quantity 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 time
Edmund 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 Consumers
More buyers = more demand
 Consumer Tastes and Preferences
When this changes so will demand
 Consumer Income
More income = more demand
 Prices of Related Goods
If the substitute has a better price the demand for the
other product will decrease
 Consumer 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
1,000
Quantity
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 supply
 Prices 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
100
Quantity
200
300
400
500
600
700
800
Market Price for Notebook Computers
Price
Demand
Supply
$2,100
1,800
1,500
1,200
900
600
300
100
Quantity
200
300
400
500
600
700
800
Macroeconomics
Macroeconomics studies the economic
behavior and relationships of the entire
society.
Microeconomics
Microeconomics 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 competition
Large number of suppliers offering very similar
products
Monopoly
One supplier offering a unique product
Between the Extremes
Oligopolies
Few businesses offering very similar products
Monopolistic competition
Many firms competing with products that are
somewhat different
Understanding the competition
Must know what type of competition to
maximize profits
Warm-Up
How does the marketing concept relate to
the concept of economic utility.
Utility Means Satisfaction
Economic utility (the amount of satisfaction a
consumer receives from the consumption of a
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