MARKETING BEGINS WITH ECONOMICS CHAPTER 03 11/21/2018 MARKETING BEGINS WITH ECONOMICS MARKETING

What is an economy? The way a nation makes choices. These choices involve how the nation will use its resources to produce and distribute goods and services.

What Makes Up an Economy? Resources/Factors of Production: All things used in producing goods and services Land Labor Capital Entrepreneurship

Land and Labor Land: Everything on the earth in its natural state / the earth’s natural resources Natural Resources! Labor: All the people who work in the economy Labor includes: Full and Part-time Workers Both the Public and the Private sector

Capital and Entrepreneurship Capital: The money needed to start and operate a business; The goods used in the production process Entrepreneurship: The skills of the people willing to risk their time and money to run a business

Scarcity Unlimited wants and needs but limited resources FORCES US TO MAKE DECISIONS! Drives economic choices The basic economic problem

The Importance of Economic Understanding The basic economic problem Scarcity Who makes the decisions? Controlled economy (AKA Command Economies) —government Free economy—individuals Mixed economy—government and private enterprise

How Strong is an Economy? In order to see how well an economy is doing we look at 3 things! GDP: gross domestic product—how much is produced within a nations borders GNP: Gross National Product—how much is produced by a nation including foreign production Standard of Living: what people in that economy are used to having Chapter 3

Economic Cycle Peak Recession Recovery Depression Also known as the business cycle! Recession: a period of economic decline; 6 months or less Depression/Trough: a long recession; more than 6 months Recovery/Expansion: a period of economic growth following a recession or depression Peak: Height of economic prosperity Peak Recession Recovery Depression

Current Event Go to my teacher blog Assignment is under Unit 3 Focus on a resource! Employment Natural Resources Droughts, oil

Where is America We are in a RECOVERY? Why does it not necessarily feel like we are in a recovery? How is this impacting businesses and their marketing activities here in town? How is the recovery impacting businesses and marketing activities as a whole in the U.S.?

Supply and Demand

Supply/Demand The 4 economic resources all go into creating products for consumers to buy in an economy We measure the amount of product and the desire for a product in an economy through supply and demand

What is Supply and Demand? Supply: How much of a product is available in relation to price Demand: How much a product is desired by consumers in relation to price

Demand Curve for Movies Tickets 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

Supply Curve for Movies Tickets 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

Intersecting Supply and Demand Supply meets Demand= Market Equilibrium: The optimum price at which a product should be sold

Demand Curve for Tablets Price $2,100 1,800 1,500 1,200 900 600 300 100 Quantity (in 000s) 200 400 500 700 800

Supply Curve for Tablets Price $2,100 1,800 1,500 1,200 900 600 300 100 Quantity (in 000s) 200 400 500 700 800 Chapter 3

Market Price (Equilibrium) for Tablets $2,100 1,800 1,500 1,200 900 600 300 100 Quantity (in 000s) 200 400 500 700 800 Demand Supply Market Price

Supply and Demand Activity Equilibrium--$4.00 at 5,000,000 cases Chapter 3

Elastic and Inelastic Demand Some products demand changes when price changes Price goes up demand goes down Price goes down demand goes up THIS IS KNOWN AS ELASTIC DEMAND Inelastic Demand Some products demand does not change with increases in price THIS IS INELASTIC Example: gasoline

Review Questions What is an economy? What are the 4 economic resources? What are 3 indicators that show the strength of an economy? Chapter 3

Types of Economies Chapter 3

Types of Economies Determined by how economy answers these three questions regarding resources: What to make? How to make it? Whom to make it for?

Controlled/Command Economy Government controls the economy and answers 3 economic questions Countries with this economic system have a communist government

Free Economy/Market Businesses owned by individuals not government Decisions are based on consumers Countries with this type of economy are Capitalist!

Mixed Economies Economies that contain elements of both free and controlled economies Most countries are considered to have mixed economies but tend to lean more towards one type

Left of center but right of communism Economic Spectrum Command Economy Communism On the far left Market Economy Capitalism On the far right Socialism Left of center but right of communism Chapter 3

Economic Systems Chapter 3

Socialism Increased government involvement in.. Individual lives and the economy The government runs key industries makes economic decisions More social services for all and free or low cost medical care Examples: Canada, Germany, Sweden, Australia and Great Britain are all examples of socialist economies

Communism The government runs everything (Totalitarian government) Only one political party, the Communist party, runs the government All people able to work are assigned jobs – there is virtually no unemployment The government assigns housing, schools, and occupations There is little to no economic freedom Examples Cuba, North Korea

Capitalism An government characterized by private ownership of businesses marketplace competition The government is concerned about its people and takes care of those who cannot care for themselves The political system democracy The United States and Japan are examples of a Capitalist Economy

America’s Private Enterprise Economy In America we have Private Enterprise Businesses are based on independent decisions by businesses and consumers Creates additional resources

How strong is an economy? GDP: how much is produced in a with in the borders of a nation in a year GNP: how much is produced within the nation and by businesses owned by a nation in other countries Includes foreign production Standard of Living—what is the “norm” for people in that nation Chapter 3

Economies In Transition Economies change over time China—transitioning from communist to socialist State owned industries have been privatized (government owned businesses are sold to private citizens) USA—how do you see our system transitioning?

Opening Take a graphic organizer and note guide from the round table Chapter 3

Economic Utility and Marketing

Pure Competition The market condition where there is a large number of suppliers offering very similar products Price Quantity

Monopoly The market condition in which one supplier offers a unique product Price Quantity

Oligopolies The market in which a few businesses offer very similar products or services Price Quantity

Monopolistic Competition The market in which there are many firms competing with products that are somewhat different. Price Quantity

Each player is given $1500 divided as follows: 2 $500's, 2 $100's, 2 $50's, 6 $20's, 5 $10's, 5 $5's, and 5 $1's. All remaining money and other equipment go to the Bank. Select as Banker a player who will also make a good Auctioneer. Chapter 3

Utility Means Satisfaction Economic utility Form utility Time utility Place utility Possession utility Information utility

Utility The functions of marketing add value to a product The added value is called Utility Utilities are the attributes of a product or service that make it capable of satisfying consumer’s wants and needs There are 5 utilities involved with all products Form Time Place Possession Information

Form Utility Involves changing raw material or putting parts together to make them more useful Form Utility deals with making or producing things

An Example of Form Utility A Tree In its original state it has value as an object of beauty, supplies oxygen, prevents soil erosion, and provides a home for animals. When a tree is cut down and used in making other products its usefulness changes. The raw material becomes part of a new product that has a different value Form Utility takes place also when a manufacturer assembles parts into a product pieces of wood assembled into furniture

Place Utility Having a product where customers can buy it Businesses study consumer shopping habits to determine the best sales outlets for their products Outlets include catalogs, the internet, retail stores

Time Utility Having the product available at a certain time of the year or a convenient time of day Time Utility requires the marketer to plan ahead in order to have the right product at the right time

Possession Utility The exchange of a product for some monetary value Alternatives to cash may be accepted these include: In business to business situations companies also grant customers credit Credit Cards Checks Possession Utility is involved every time legal ownership of a product changes hands

Information Utility Involves communication with the consumer Examples of sources of information: Packaging Tags and Labels Advertising Owner’s Manuals Websites

Benefits of Product Utility Added value Increases demand When a product becomes popular the number of suppliers of the product will increase this increases competition reduces the price Competition also makes manufacturers improve products to better satisfy customer wants and needs