1. Marketing Begins with Economics Marketing Chapter 3

2. Warm-Up Using the worksheet tell what you know about economics and what you want or need to learn about it. LEAVE the THIRD COLUMN Blank.

3. The Importance of Economic Understanding The basic economic problem  Scarcity Unlimited wants/needs with limited resources Economic System  A collection of laws, institutions and activities that provide a framework for economic activity

4. Who makes the decisions? Controlled (Command) economy  government Regulated economy  Shared between government and individuals Free (Market) economy  individuals

5. America’s Private Enterprise Economy Profit Motive  Use of resources toward the greatest profit for the producers Characteristics  Consumers (demand)  Producers (supply)  Government (regulate)

6. Answer the following: What if the U.S. Economy was strictly a free/market economy and not regulated by government? Predict how the lack of government regulations might affect the environment, consumers, and workers.

7. OBSERVING THE LAW OF SUPPLY AND DEMAND Supply  Quantity of product the producer is willing and able to provide for a price Demand  Quantity of products consumers are willing and able to purchase for a price

8. What’s So Special About a Rose? Gather therefore the Rose, Whilst yet is prime, For soon comes age, That will her pride deflower; Gather the Rose of Love, Whilst yet is time Edmund Spenser 1552 - 1599

9. What’s in a name? That which we call a rose By any other name would smell as sweet William Shakespeare 1564 - 1616

10. O, my Luve is like a red, red rose, That’s newly spring in June. O, my Luve is like a melodie, That’s sweetly played in tune. Robert Burns 1759 - 1796

11. Determinants of Demand Number of Consumers  More buyers = more demand Consumer Tastes and Preferences  When this changes so will demand Consumer Income  More income = more demand Prices of Related Goods  If the substitute has a better price the demand for the other product will decrease Consumer Expectations  When consumers expect something about the future it can change demand for a product

12. Demand Curve for Movies Price $10.50 9.00 7.50 6.00 4.50 3.00 1.50 1,000 Quantity 2,0003,0004,0005,0006,0007,000

13. Determinants of Supply Number of Producers  More producers = more supply Resource Prices  Higher cost of resources = less supply (unless they can make the cost up in the increase of price) Technological Changes  Better productivity = more supply Prices of other Products of the business  If one product’s price raises supply increases but could cause a decrease of supply of another product Producer Expectation  Expectations of future changes could decrease current supplies

14. Supply Curve for Notebook Computers Price $2,100 1,800 1,500 1,200 900 600 300 100 Quantity 200300400500600700800

15. Market Price for Notebook Computers Price $2,100 1,800 1,500 1,200 900 600 300 100 Quantity 200300400500600700800 DemandSupply

16. Macroeconomics Macroeconomics Macroeconomics studies the economic behavior and relationships of the entire society.

17. Microeconomics Microeconomics Microeconomics is the study of relationships between individual customers and producers.

18. Warm-Up Why is an understanding of economics more important to marketing now than it was in the past?

19. All-Out Competition or No Competition At All Pure competition  Large number of suppliers offering very similar products Monopoly  One supplier offering a unique product

20. Between the Extremes Oligopolies  Few businesses offering very similar products Monopolistic competition  Many firms competing with products that are somewhat different Understanding the competition  Must know what type of competition to maximize profits

21. Warm-Up How does the marketing concept relate to the concept of economic utility.

22. Utility Means Satisfaction Economic utility (the amount of satisfaction a consumer receives from the consumption of a product) Form utility – changes in tangible parts of product Time utility – available when customer wants it Place utility – available where the customer wants to buy it Possession utility – affordability of the product