Marketing Principles Chapter 3: Economics & The Free Enterprise System

Economics The study of the choices & decisions that affect making, distributing, and using goods & services.

Why Economics is Important to Marketing? You must understand how the system works to fully understand how marketing works

Everyone has wants Economic Wants: Unfulfilled desires that cost money to attain Noneconomic Wants: Unfullfilled desires that do not cost money to attain. Marketing focuses on consumers’ economic wants.

Producers & Businesses produce or make available goods & services to satisfy consumers’ economic needs & wants. Goods – Tangible(touch) products Services – Intangible(Can’t touch)

Goods & Services Must Have Utility (usefulness) to Satisfy Consumers’ Wants & Needs Marketing activities add utility to goods & services through: –Form Utility –Place Utility –Time Utility –Possession Utility –Information Utility

When there are more wants than resources available a condition of Scarcity exists Scarcity – When economic wants outweigh available resources. Economic Resources (Factors of Production) – All the things used in producing goods & services. –Land – All the Earth’s natural resources available. –Labor – All the people who work in the economy. –Capital – Money needed to start & operate a business. –Entrepreneurship – Skills of people who are willing to risk their time & money to run a business.

Every Nation Must Confront Scarcity by Answering 3 Basic Economic Questions What goods & services should be produced? How should goods & services be produced? For whom should the goods & services be produced?

United States Economic System Free Enterprise System(Private Enterprise)(Market System)(Capitalism): System in which individuals make their own decisions regarding their economic choices. How Free Enterprise Answers Economic Questions: –What? Determined by producers based on consumer demand –How?Determined by businesses(producers) –Whom?Determined by businesses(producers) Communism(Command)-Government Controlled opposite of a free enterprise system. Socialism – In between capitalism & communism.

Basic Characteristics of Free Enterprise System Profit Motive Risk Competition Freedom of Ownership Minimal Government Involvement(Referee)

In a Market Oriented Economcy Goods & Services are produced based on consumer demand. Demand: the amount of goods & services consumers are willing & able to buy at a given price.

Value of goods & services are determined by demand & regulated by supply & prices in a free enterprise system Supply – The amount or quantity of goods & services producers are willing to provide at a given price. Price – Value set by the market. Supply & demand work together to set prices for goods & services.

Marketing’s function in the Free Enterprise is to provide a bridge between producers & consumers so exchange of goods & services can occur Marketing Process

This is the End of Our Economic Tale! WOO HOO!