The Economics of Supply and Demand 9 The Economics of Supply and Demand 9.1 Supply and Demand 9.2 Pricing Strategies 9.3 Market Conditions

Winning Strategies Cereal Stars Wheaties cereal discovered by accident first featured star was fictitious Lou Gehrig was first actual star featured many athletes make it a career goal to be featured on the box in 1999, women in sports were featured Chapter 9

Lesson 9.1 Supply and Demand Goals Explain the relationships between supply, demand, and price. Discuss the government’s influence on pricing. Chapter 9

Terms law of demand law of supply scarcity equilibrium price fixing bait and switch price discrimination Chapter 9

THE LAWS OF SUPPLY AND DEMAND the relationship between the quantity of a product that consumers are willing and able to purchase and the price Chapter 9

producers businesses that use resources to develop products and services supply the relationship between the quantity of a product that producers are willing and able to provide and the price Chapter 9

Price-Demand Relationships law of demand an inverse relationship when the price goes up, demand goes down when the price goes down, demand goes up Chapter 9

Price-Supply Relationships law of supply when the price goes up the supply produced goes up when the price goes down the supply produced goes down Chapter 9

Scarcity scarcity consumers have limited money to spend producers have limited resources to use for production Consumers and producers must decide how to use their limited resources to meet unlimited wants and needs. Chapter 9

Equilibrium equilibrium the point where the supply and demand curves intersect indicates the best quantity and price for goods and services Chapter 9

Chapter 9

Concerts in the Spotlight Concert prices can be set high. limited supply high demand If demand is high enough, supply can be increased by adding a second show. Chapter 9

How does price affect demand? Chapter 9

GOVERNMENT INFLUENCE ON PRICING private-enterprise system based upon independent decisions made by consumers and businesses Chapter 9

The U.S. government has an influence on prices charged for merchandise directly and indirectly through antitrust laws, taxation, and various consumer protection laws. Chapter 9

Benefits of Competition monopoly where one business controls the entire market Antitrust laws encourage competition and help avoid monopolies. Chapter 9

Taxation Taxation can be used by the government to encourage or discourage sales. Chapter 9

Illegal Pricing price fixing when related businesses conspire to charge high prices illegal in U.S. Chapter 9

bait and switch price discrimination when a product that is advertised at a great price is “out of stock” salesperson tries to sell customer a higher-priced alternative advertised prices cannot be misleading price discrimination occurs when one individual, group, or business is charged a higher price than others purchasing the same product or service Chapter 9

List three ways the government influences pricing. Chapter 9

Lesson 9.2 Pricing Strategies Goals Discuss pricing strategies used by businesses to increase sales. List five steps for determining price. Chapter 9

Terms operating expenses markup price lines loss-leader pricing Chapter 9

PRICING CONSIDERATIONS price the amount that customers pay for products and services Chapter 9

pricing operating expenses markup the process of establishing and communicating the value of goods and services to customers operating expenses all the costs associated with running your business markup the amount that is added to the cost of an item to cover operating expenses and allow for a profit Chapter 9

pure competition market price many companies offering the same product customers do not recognize major differences in the brands the market will drive the prices low as businesses compete for consumers’ business market price determined by laws of supply and demand if not sufficient to cover costs and allow for a profit, the business will cease production of the product Chapter 9

Pricing Policies one-price policy flexible pricing policy all customers pay the same price for a product flexible pricing policy allows customers to negotiate a price within a range Chapter 9

price lines geographic pricing distinct categories of merchandise based upon price, quality, and features geographic pricing allows pricing variations based upon geographic location Chapter 9

A Variety of Pricing Strategies Psychological Pricing creating an illusion for customers Prestige Pricing higher-than-average pricing targets customers seeking status and quality Chapter 9

Volume Pricing Promotional Pricing when a supplier provides a lower price to a customer who buys a high volume of product Promotional Pricing offering customers an incentive to get them in the store two-hour/ 50% off sale Chapter 9

special event promotion Loss-Leader Pricing the willingness to take a loss on the reduced prices of selected items in order to create more customer traffic special event promotion associates a special sale with a major event Chapter 9

rebates multiple-unit pricing trade-in allowance coupons on products that customers can mail in for a refund depends upon further action by the customer multiple-unit pricing a volume based discount trade-in allowance giving a store your old product when purchasing a new product usually results in a discount on the new product purchase Chapter 9

List and describe five pricing strategies to increase sales. Chapter 9

DETERMINING THE PRICE There are five steps to determining the price to charge for a product or service. Chapter 9

Establish the price objectives. Determine the cost of the product or service. Estimate consumer demand for your product or service. Study the competition. Decide on a pricing strategy. Chapter 9

List the five steps for determining price. Chapter 9

Lesson 9.3 Market Conditions Goals Define the business cycle and describe its impact on sports and entertainment. Discuss the importance of monitoring consumer trends. Chapter 9

Terms business cycle inflation shoulder periods Chapter 9

IMPACT OF THE BUSINESS CYCLE business cycle (economic cycle) the ups and downs of the economy Chapter 9

Chapter 9

Expansion expansion peak the upside of a business cycle highest point of growth in the economy Chapter 9

Contraction contraction inflation the downside of a business cycle recession or depression inflation when prices for goods and services rise faster than consumer income Chapter 9

Business Reaction trough recovery prosperity lowest point of contraction recovery economy shows signs of improving prosperity the period of business expansion following recovery Chapter 9

Seasonal Cycles For some businesses, demand fluctuates with the seasons. high season the season with the highest demand low season the season with the lowest demand Chapter 9

shoulder periods periods of moderate demand Sports and entertainment marketing strategies must be developed to help even out the fluctuations created by changing seasonal demands. Chapter 9

What is inflation and how does it contribute to recession? Chapter 9

IMPACT OF CONSUMER TRENDS Trends are dictated by television revenue sponsors consumer demand Chapter 9

Retro Television Retro show fans like to relive the good old days and recall positive memories of growing up watching the stars in the sitcoms. Popular show reruns are inexpensive to show on television. Chapter 9

Game Shows There are game show channels that rerun old favorites. New game shows are being produced to meet demand. Chapter 9

Audience Ratings Speak Television networks cannot afford the risk of having viewers switch channels to watch a more exciting show on a competing network. Some series do not last more than six airings due to flat ratings. Chapter 9

Socio-Culture Issues Socio-culture issues include trends in customer attitudes lifestyles opinions demographics Assessing consumers’ ever-changing needs and wants is the bottom line for the success or failure of a product or service. Chapter 9

Why must sports and entertainment marketers pay careful attention to consumer trends? Chapter 9

PERFORMANCE INDICATORS EVALUATED Demonstrate an understanding of the economic challenges facing television network programming. Demonstrate critical thinking and problem-solving skills. Chapter 9

Describe promotions appropriate for the target market that will result in increased ratings for the bowl game. Describe advertisements that will attract the attention of your target market. Develop a strategy to encourage viewers of the Price Is Right to watch the bowl game. Chapter 9

THINK CRITICALLY How have the number of bowl games affected the television ratings for the games? Why are the scheduled date and time of the game important factors for ratings and promotions? Chapter 9

Why should television networks pay attention to the programming scheduled around the game and on competing networks when making decisions? How can an association be made between the game show and the bowl game? Chapter 9