chapter 3: marketing begins with economics
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Chapter 3: Marketing Begins with Economics. Mrs. Piotrowski Marketing. SECTION 1:. Scarcity & private enterprise. Make a list of your last 5 purchases. How did the availability of product choices and amount of money affect your purchasing decision?. The Importance of Economic Understanding. - PowerPoint PPT PresentationTRANSCRIPT
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Company
LOGO
Chapter 3:Marketing Begins with Economics
Mrs. PiotrowskiMarketing
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SCARCITY & PRIVATE ENTERPRISE
SECTION 1:
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On your whiteboards, please put the following information:
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● It’s Christmas time, please list ALL the items you would want..money is no object
● Circle those you think Santa will bring you…
● What is the difference?4
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Make a list of all the items you would love to buy and/or get for Christmas.
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My wants/wish list...
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Once reality hits….this is what i’ll get...
A book about a vacation location…
How does the availability of product choices and amount of money affect
your purchasing decision?
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The Importance of Economic Understanding
• The marketing process is scientific…– It relies on the principles and concepts of
economics.• Knowledge of economics and how economic
decisions are made improves marketing decision making.
– An understanding of the types of competition that businesses face also contributes to better marketing decisions.
Many people believe that effective marketing relies almost solely on creativity, but…
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The Basic Economic Problem
People’s wants and needs are unlimited.Resources are limited.
• Unlimited wants and needs, combined with limited resources, result in scarcity.
• Scarcity is the basic economic problem…– Because of scarcity choices must be made
regarding how to best utilize resources.
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Who makes decisions?
• Economic Resources - natural resources, capital, equipment and labor.
• All economies must answer 3 questions:1. What goods and services will be produced?2. How will they be produced?3. For whom will they be produced?
• Economies are organized into different economic systems based on how these 3 questions are answered.
An economy is designed to facilitate the use of limited resources to satisfy the needs of people.
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Types of Economic Systems• Controlled Economy – The government attempts
to own and control important resources and to make the decisions about what will be produced and consumed.
Details:1. Central ownership of property/resource 2. Centrally planned economy 3. Lack of consumer choice Example: Cuba (changing) and North Korea
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Types of Economic Systems• Free Economy (Market Economy) – Decisions
are made independently with no attempt at government regulation or control.
• Details:1. Private ownership of property/resources 2. Business decisions are driven by the desire to earn a profit 3. There is a great deal of competition. 4. Consumers have many choices
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Types of Economic Systems• Mixed Economy – The resources and decisions
are shared between the government and other groups or individuals. A combination of controlled and free.
• Details:1. Individuals and businesses as decision makers for
the private sector 2. Government as decision maker for the public
sector. 3. A greater government role than in a free market
economy
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America’s Private Enterprise Economy
• The U.S. has many of the characteristics of a free economy.– The U.S. economic system is often called a
private enterprise or free enterprise economy.(Also free market or market economy)
• Private enterprise is based on independent decisions by businesses and consumers, with a limited government role.
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Characteristics of Private Enterprise• Resources of production are owned and
controlled by individual producers.
• Producers use the profit motive to decide what to produce. – The profit motive is the use of resources to
obtain the greatest profit.
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Characteristics of Private Enterprise
• Individual consumers make decisions about what will be purchased to satisfy needs.
• Consumers use value in deciding what to consume.– Value is an individual view of the worth of a
product or service.
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Characteristics of Private Enterprise
• The government stays out of exchange activities between producers and consumers unless it is clear the individuals or society are harmed by the decisions.
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Supply & Demand
• Consumers are individuals who purchase products and services to satisfy needs.– They create demand.
• Producers are businesses that use their resources to develop products and services.– They create supply.
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OBSERVING THE LAW OF SUPPLY & DEMAND
SECTION 2:
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Write down 2 things you have purchased recently…1 need and 1 want…and how much they cost.
If each had cost 20% more,50% more,
100% more,Would you still have
purchased them?
What determines the point at which you decide not to buy something?
SOLVE.
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Macroeconomics vs. Microeconomics
• Macroeconomics studies the economic behavior and relationships of an entire society.
• Microeconomics examines relationships between individual consumers and producers.
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Law of Demand
• When the price of a product is increased, less will be demanded.
• When the price is decreased, more will be demanded.
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Supplying the Product
• There are several factors that influence what and how many products a business will produce:1. Possibility of profit2. Amount of competition3. Capability of developing and marketing the
products or services• The specific types of economic resources (natural
resources, capital, equipment, & labor) will determine this capability.
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Law of Supply
• As the price increases, producers will manufacture more of a product.
• As the price goes down, fewer will be manufactured.
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Intersecting Supply & Demand• To determine the amount of a product or service
that will actually be produced and sold, a business needs to combine the supply and demand curves.
• The point where supply and demand for a product are equal is known as the market price.
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TYPES OF ECONOMIC COMPETITION
SECTION 3:
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• At your table, please list how many places in Lancaster (local area) can you buy the following products:– Fruit– An airline ticket (the actual carrier, not “cheap
airfare.com”)– T-shirt– Electric power
• Which one of these had the most and least?
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Make a list of 6 businesses, large and small, that operate here in Lancaster.
Rate the businesses from 1 to 10 based on how
much market control you think they have over the
prices they charge.
Why do you think some businesses have more control
over this than others?
SOLVE.
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Forms of Economic Competition
• Two characteristics are important to determine the type of economic competition:1. The number of firms competing in the
market.2. The amount of similarity between the
products of competing businesses.
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Forms of Economic Competition
• Pure Competition – Many suppliers offer very similar products (agricultural).
• Monopolistic Competition – Many firms compete with products that are somewhat different (most retail businesses).
• Oligopoly – A few businesses offer very similar products or services (airlines).
• Monopoly – One supplier offers a unique product (utility companies).
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ENHANCING ECONOMIC UTILITY
SECTION 4:
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Identify a product in our classroom.
How could the product be changed?
Why would you make these changes?
SOLVE.
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Utility Means Satisfaction
• Economic utility is the amount of satisfaction a consumer receives from the consumption of a particular product.– Products that provide great satisfaction have
higher economic utility.– Products providing less satisfaction have a
lower utility.• Businesses use economic utility to
increase the chances that consumers will buy their products and services.
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Types of Utility
• Form utility results from changes in the tangible parts of a product or service (one bank provides a better interest rate than another).
• IE: Oreo cookies - stay fresh peel away packaging and changing the creme
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Types of Utility
• Time utility results from making the product or service available when the consumer wants it
• IE: Bank stays open late on Fridays
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Types of Utility• Place utility is making the products or
services available where the consumer wants them
• IE: Bank located in the grocery store, Tim Hortons located in gas stations.
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Types of Utility• Possession utility results from the
affordability of the product or service • IE: Extending credit to customers to allow
them to make a purchase, rent to own
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