1. MARKETING BEGINS WITH ECONOMICS
CHAPTER 03
4/16/2017
MARKETING BEGINS WITH ECONOMICS
3.1 Scarcity and Private Enterprise
3.2 Observing the Law of Supply and Demand
3.3 Types of Economic Competition
3.4 Enhancing Economic Utility
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MARKETING

2. SCARCITY AND PRIVATE ENTERPRISE
GOALS for Lesson 3.1
Identify the basic economic problem.
Describe how America’s private enterprise economy works.
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3. The Importance of Economic Understanding
The basic economic problem– scarcity (unlimited needs and wants, combined with limited resources)
Who makes the decisions?
Controlled economy—government (Cuba?)
Regulated economy—shared (between gov’t. and other groups or individuals)
Free economy—individuals (no gov’t. regulation)
Mixed economy—shared by government and private enterprise (us?)
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4. America’s Private Enterprise Economy
Characteristics
Resources of production are owned and controlled by individual producers
Producers use the profit motive in deciding what to produce
Consumers want to satisfy a need
Consumers use value in deciding what to consume
VALUE vs. PROFIT MOTIVE
(gov’t. only involved if harm possible)
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5. America’s Private Enterprise Economy
Consumers – limited resources to satisfy needs
Demand – the relationship between the quantity of a product consumers are willing and able to buy at a certain price
Gather information and conduct research
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6. America’s Private Enterprise Economy
Producers – sell products and service to consumers for a profit
Supply – the relationship between the quantity of a product that producers are willing and able to provide at a price
Research consumer wants and needs
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7. OBSERVING THE LAW OF SUPPLY AND DEMAND
GOALS for Lesson 3.2
Explain microeconomics and concept of consumer DEMAND.
Identify factors that affect SUPPLY and its relationship to DEMAND.
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8. Macroeconomics
Macroeconomics studies the economic behavior and relationships of the entire society.
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9. Microeconomics
Microeconomics is the study of relationships between individual customers and producers.
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10. Question
Why is it more beneficial for marketers to study the microeconomics rather than macroeconomics?
Give specific examples.
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11. Microeconomics and Consumer Demand
Factors affecting demand
If a need or want is particularly important or strong
Available supply of product/service to satisfy consumer needs
Availability of alternatives
Analyzing demand curves
Demand curve
Law of demand
Price increases, fewer buy
Economic market
All the consumers who will buy a product/service. $P Q
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12. 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
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13. Supplying the Product
Several factors that influence what and how many products or services a business will produce.
Profit
Handling the competition (amount and type of)
Use resources available to develop products and services (economic resources)
Analyzing supply curve
Supply curve (relationship between P and Q)
Law of supply (price up, produce more) (down, less)
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14. Supply Curve for Watches
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
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15. Intersecting Supply and Demand
Market price (or equilibrium price)…THE PRICE AT WHICH SUPPLY MEETS DEMAND!
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16. Demand Curve for Notebook Computers
Price
$2,100
1,800
1,500
1,200
900
600
300
100
Quantity
200
400
500
700
800
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17. Supply Curve for Notebook Computers
Price
$2,100
1,800
1,500
1,200
900
600
300
100
Quantity
200
400
500
700
800
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18. Market Price for Notebook Computers
$2,100
1,800
1,500
1,200
900
600
300
100
Quantity
200
400
500
700
800
Demand
Supply
Equilibrium’
Price (or Market Price)
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19. In Groups
Using Newspapers, find one specific example for each of the factors that affect demand, 1. convenience or availability, 2. supply, 3. availability of alternatives
Example – 5 cell phone offers in one Sunday newspaper might cause consumers to wait and research the best value.
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20. TYPES OF ECONOMIC COMPETITION
GOALS for Lesson 3.3:
Define pure competition and monopoly.
Explain the characteristics of oligopolies and monopolistic competition.
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21. All-Out (PURE) Competition…
Pure competition – large # of SUPPLIERS, offering similar products.
Businesses have no control over prices (one supplier can’t raise (control) price)
See figure 3-6 (2 slides from now)
Examples: ag. products, milk, blank CD’s
Horizontal demand curve D
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22. … or No Competition At All (MONOPOLY)
One supplier! Unique product!
Consumer Must accept price! – NO COMPETITION!
Gov’t. usually controls…like utilities! Or cable TV!
Vertical demand curve D
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23. Demand Curve for One Company in Pure Competition
Any thoughts…comments?…
Price
Quantity
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24. Demand Curve for a Monopoly
Price
Quantity
Is Microsoft a monopoly? How bout diamonds?
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25. Between the Extremes Oligopolies (such as the airline industry)
Def. = few (?) businesses, similar products
IF those few cooperate, they can act like a MONOPOLY
IF those few compete, they can act like PURE COMPETITION
Auto manufacturers, computer manufacturers, taxis, movie theaters, banks, hospitals
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26. Demand Curve for One Company in an Oligopoly
Price
Quantity
REASON: one company cannot really
influence pricing
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27. Demand Curve for the Industry in an Oligopoly
Price
Quantity
Similar to monopoly…especially if the
few businesses cooperate!
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28. Monopolistic competition
– many firms, somewhat different product. (most common form of bus.)
Most retailers
Businesses have little price control
Almost flat (horizontal) demand curve
Consumers have several choices – some have major differences, some minor.
Examples: restaurants, malls, shoes, cosmetics
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29. Demand Curve for Monopolistic Competition with Few Product Differences
Price
Quantity
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30. Demand Curve for Monopolistic Competition with Greater Product Differences
Price
Quantity
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31. Understanding the competition
FIRST! Read “elasticity of demand” on p. 73
Marketers want to be different, and better = more control of price in the marketplace.
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32. ENHANCING ECONOMIC UTILITY
GOALS for Lesson 3.4
Define various types of economic utility.
Explain how marketers use utility to increase customer satisfaction.
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33. Utility Means Satisfaction
Economic utility – the amount of satisfaction a consumer receives from the consumption of a particular product or service. Businesses try to increase utility to improve the likelihood of consumer purchase/consumption.
Form utility
Time utility
Place utility
Possession utility
Read on p
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