1. Ch. 8, Market Forces
Marketing Dynamics
Supply
Demand

2. Objectives Explain who controls a market economy.
Ch. 8, Market Forces
Objectives
Explain who controls a market economy.
List the three main market forces.
Describe the effect of price on supply and demand.
List three factors that cause changes in demand.

3. Objectives Describe the effect of supply and demand on price.
Ch. 8, Market Forces
Objectives
Describe the effect of supply and demand on price.
Describe three ways a business can increase profits.
Explain the role of the consumer in determining which products get produced.

4. Marketing Terms demand supply market demand market supply
Ch. 8, Market Forces
Marketing Terms
demand
supply
market demand
market supply
law of demand
law of supply
profit motive
productivity
competition

5. Market Forces at Work How do the right products get to the
Ch. 8, Market Forces
Market Forces at Work
How do the
right products get to the
right places, in the
right quantities, and at the
right prices?

6. Market Forces at Work Three main market forces
Ch. 8, Market Forces
Market Forces at Work
Three main market forces
supply and demand
profit
competition
They coordinate a market economy like an “invisible hand”
according to Scottish philosopher Adam Smith

7. Supply and Demand Demand quantity of a product
Ch. 8, Market Forces
Supply and Demand
Demand
quantity of a product
a consumer is willing and able to buy
at a certain price

8. Supply and Demand Supply quantity of a product
Ch. 8, Market Forces
Supply and Demand
Supply
quantity of a product
a supplier is willing to provide
at a certain price
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9. #1 How does individual demand differ from market demand?
Ch. 8, Market Forces
Supply and Demand
Individual demand
quantity of a product demanded
by an individual consumer
Market demand
sum of all individual demands
for a specific product
#1 How does individual demand differ from market demand?

10. #2 How does individual supply differ from market supply?
Ch. 8, Market Forces
Supply and Demand
Individual supply
quantity of a product supplied
by one supplier
Market supply
sum of all individual suppliers’ supply
of a specific product
#2 How does individual supply differ from market supply?

11. Effect of Price on Demand
Ch. 8, Market Forces
Effect of Price on Demand
Law of demand
when prices fall
demand will rise
when prices rise
demand will fall
The law of demand is based on
market demand

12. Ch. 8, Market Forces
Law of Demand
Demand will rise
When prices fall

13. Law of Demand Consumers buy more (demand rises) when price is low.
Ch. 8, Market Forces
Law of Demand
Consumers buy more (demand rises) when price is low.
Consumers buy less (demand falls) when price is high.
#3 What do consumers do when there
is a sale (prices fall)?
What do consumers do when prices rise?

14. Effect of Price on Supply
Ch. 8, Market Forces
Effect of Price on Supply
Law of supply
when prices are high
supply will rise
when prices fall
supply will fall
The law of supply is based on
market supply

15. Law of Supply When prices are high Supply will rise
Ch. 8, Market Forces
Law of Supply
Supply will rise
When prices are high

16. Law of Supply Manufacturers will supply
Ch. 8, Market Forces
Law of Supply
Manufacturers will supply
more of a product when its price is high
because they will make more profit
less of a product when the price falls
because they will make less profit

17. #4 Is the environment ever constant?
Ch. 8, Market Forces
Constant Environment
The laws of supply and demand describe
what happens to supply and demand as
prices change in a constant environment
A constant environment is one in which
other factors do not change
a stable economy, no marketing campaigns, no changes in social trends
#4 Is the environment ever constant?

18. #5 Give an example of how each of these can change demand.
Ch. 8, Market Forces
Changes in Demand
Changes in demand can be caused by changes in
marketing campaigns
the economic situation
social trends
These changes can interfere with the laws of supply and demand
#5 Give an example of how each of these can change demand.

19. Effect of Supply and Demand on Price
Ch. 8, Market Forces
Effect of Supply and Demand on Price
Price affects supply and demand
and gives us the laws of supply and demand
However
the level of supply and
the level of demand
interact to affect price

20. Ch. 8, Market Forces
#6 What happens to the price of fruit when the supply of fruit is high, but the demand is low?

21. Effect of Supply and Demand on Price
Ch. 8, Market Forces
Effect of Supply and Demand on Price
#7 What happens to the price of gas when the supply of gas is low, but demand is high (consumers want to drive)?

22. Effect of Demand on Supply and Price
Ch. 8, Market Forces
$35
Supply Falls
Demand Rises
Suppliers can’t keep up with the rapid sale of basketballs.
Price Rises
Consumers start buying lots of basketballs.
Suppliers raise the price of basketballs. Consumers pay the higher price.
$20

23. Effect of Rising Demand on Supply and Price
Ch. 8, Market Forces
Effect of Rising Demand on Supply and Price
When demand is rising
and supply falls
marketers raise prices
If demand is still high
even though the price is high
suppliers will start making more basketballs
and supply will rise

24. Effect of Demand on Supply and Price
Ch. 8, Market Forces
Effect of Demand on Supply and Price
Demand Falls
Price Falls
Supply Rises
Suppliers lower the price to sell the soccer balls.
Consumers are not buying soccer balls.
Soccer balls pile up in the suppliers’ warehouses.
$20
$15

25. Effect of Falling Demand on Supply and Price
Ch. 8, Market Forces
Effect of Falling Demand on Supply and Price
When demand is falling
and supply rises
marketers lower prices
If demand is still low
even though the price is low
suppliers will stop making soccer balls
and the supply will fall further

26. Effect of Supply on Price and Demand
Ch. 8, Market Forces
Effect of Supply on Price and Demand
Price Falls
Supply Rises
The suppliers want to sell their product before it spoils. They lower the price of strawberries.
Demand Rises
Strawberries are in season. The berries are spoiling before consumers purchase them.
The reduction in price increases consumers’ demand for strawberries. $2 $4

27. Effect of Rising Supply on Price and Demand
Ch. 8, Market Forces
Effect of Rising Supply on Price and Demand
For some items, like seasonal fruits
the supply rises rapidly
marketers lower the price to sell the fruit faster
In this situation, consumer demand rises with the lowered prices
until the fruits are out of season
the price then rises

28. Profit $ = - $ $ Profit motive is the drive to earn more profit
Ch. 8, Market Forces
Profit
Profit motive is the drive to earn more profit $ $ $ = -
Costs and Expenses
Sales
Profit
#8 What is profit?

29. Profit What is your profit if Sales – Costs = Profit
Ch. 8, Market Forces
Profit
What is your profit if
your store sells $100 worth of merchandise and
your costs are $75?
Sales – Costs = Profit
$100 – $75 = $____
Your profit is $____

30. Profit Three main ways to increase profit decrease costs or expenses
Ch. 8, Market Forces
Profit
Three main ways to increase profit
decrease costs or expenses
increase productivity
the amount of product a worker produces per hour
increase sales

31. Profit To increase profit Think of your store with the $100 in sales
Ch. 8, Market Forces
Profit
To increase profit
decrease costs
and/or decrease expenses
Think of your store with the $100 in sales
Reduce your costs to $25
What would your profit be?
Sales – Costs = Profit
$100 – $25 = $____

32. Profit To increase profit, increase productivity
Ch. 8, Market Forces
Profit
To increase profit, increase productivity
if workers produce more product per hour
you will have more products to sell
more products to sell mean that you will
have higher sales
higher sales, with the same costs and expenses
mean higher profit

33. Profit To increase profit, increase sales
Ch. 8, Market Forces
Profit
To increase profit, increase sales
Think back to the “store” example
suppose you sold $200 worth of goods, and your costs stayed at $25
what would your profit be?
Sales – Costs = Profit
$200 – $25 = $_____
Your profit would be $_____

34. #9 What accounts for the difference in profit in columns 2 and 3?
Ch. 8, Market Forces
Sales – Costs = Profit
Situation 1
Situation 2
Situation 3
Sales
$100
$200
Costs
$75
$25
Profit
$175
#9 What accounts for the difference
in profit in columns 2 and 3?

35. #10 How does competition yield these results?
Ch. 8, Market Forces
Competition
Competition
the contest among businesses to get customers
Competition results in
better products
better quality
more services
lower prices
#10 How does competition yield these results?

36. Role of the Consumer Consumers (as a group)
Ch. 8, Market Forces
Role of the Consumer
Consumers
(as a group)
have a large impact on a market economy
through the forces of supply and demand

37. #11 Give an example of how consumers affect the success of a product.
Ch. 8, Market Forces
Role of the Consumer
If many consumers buy a product
it will probably succeed
If few consumers buy a product
it will probably fail
Few liked or bought “New Coke”
so it failed as a product
#11 Give an example of how consumers affect the success of a product.

38. Review Who controls a market economy?
Ch. 8, Market Forces
Review
Who controls a market economy?
List the three main market forces.
Describe the laws of supply and demand.
What is a constant environment?
What three factors can change demand?
How is profit calculated?
How do consumers influence a market economy?

39. Ch. 8, Market Forces
Glossary
Back
competition. Contest between two or more businesses to get customers.
demand. Quantity of a specific product that a buyer is able and willing to buy at a certain price, usually at a particular time and place.
law of demand. When prices fall, demand will rise (in a constant environment).

40. Ch. 8, Market Forces
Glossary
Back
law of supply. When prices are high, supply will rise (in a constant environment).
market demand. Sum of all the individual demands for a specific product, for a specific time period.
market supply. Sum of all the individual suppliers’ supply of a specific product, for a specific time period.

41. Ch. 8, Market Forces
Glossary
Back
productivity. Amount of product a worker produces per hour (product/hour).
profit motive. Drive to earn more profit.
supply. Quantity of a specific product that a supplier is willing to supply at a certain price.