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Marketing Begins with Economics. Chapter 3. The Basic Economic Principle. Unlimited wants and needs, combined with limited resources result in scarcity How will the resources available be used? Who will receive and who won’t? How much will they get?

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The basic economic principle
The Basic Economic Principle

  • Unlimited wants and needs, combined with limited resources result in scarcity

    • How will the resources available be used? Who will receive and who won’t? How much will they get?

    • The way those decisions are made depends on the type of economic system the person is in


Who make the decisions
Who make the decisions?

  • Controlled Economy – gov’t owns and controls important resources and decides what will be produced and consumed (Communist)

  • Regulated Economy – shared btwn gov’t and certain groups

  • Free Economy – resources are owned by individuals and decisions are made individually with limited gov’t control

  • Mixed Economy – some individual – some government


America s private enterprise
America’s Private Enterprise

  • Based on independent decisions with limited gov’t role

    • Resources of production and owned and controlled by individual producers

    • Producers use profit motive to decide what to produce

    • Individual consumers make decisions about what will be purchased to satisfy needs

    • Consumers use value in deciding what to consume

    • The gov’t only steps in when society could be harmed



3 2 microeconomics and demand
3.2 Microeconomics and Demand system

  • Macro – economy of entire society

  • Micro – relationships between individuals in the economy

  • Factors affecting demand

    • Need or want is strong

    • Availability of supply

    • Availability of alternative products

  • Demand Curve


Supplying the product
Supplying the Product system

  • What and how many?

    • Possibility of profit

    • Amount and type of competition

      • Alter product?

      • Accessories to the product instead

    • Capability of developing and marketing

      • Lots of capital (cash)

      • Location

    • Supply Curve


3 3 types of economic competition
3.3 Types of Economic Competition system

  • 2 important characteristics in determining the type of competition

    • The number of firms competing in the market

    • The amount of similarity between the products of competing businesses

    • 4 types – Pure Competition, Monopoly, Oligopolies, Monopolistic Competition


Pure competition
Pure Competition system

  • Large number of suppliers offering very similar products

    • Agricultural products – no single supplier can raise the price without hurting themselves

  • Businesses have no control over price if they want to sell their products


Monopoly
Monopoly system

  • Opposite of pure competition

  • One supplier offering a unique product

  • Supplier has almost total control

  • Consumers have to accept the price

  • Few legal monopolies in the US

    • Microsoft?

    • DeBeers Diamonds

    • Standard Oil


Oligopolies
Oligopolies system

  • A few businesses offer very similar products of services

    • If they work together they will be a monopoly, work against they will be pure competition

    • Airline industry

    • Usually if they want to increase prices they need to do it as a group or it won’t work


Monopolistic competition
Monopolistic Competition system

  • Most common type

  • Many firms competing with products that are somewhat different

  • Fewer the number of competitors and the greater the differences among the competitors’ products, the greater the control each firm will have on the market


3 4 enhancing economic utility
3.4 Enhancing Economic Utility system

  • Economic Utility “Satisfaction” – the satisfaction a consumer receives from the consumption of a product

    • Higher utility if greater satisfaction

    • Marketers try to pick out the utility of a customer and prey on location, time, form, etc.



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