Chapter 3Marketing Begins With

Economics

Scarcity and Private Enterprise

Identifying the basic economic problem How our private enterprise economy works.

Understanding Economics

Creativity fuels effective marketing methods Generating the customer’s awareness.

Effective marketing relies on the principles and concepts of economics. How simple decisions are made.

Understanding your competition helps improve decision making skills.

Basic Economic Problem

Unlimited wants and needs of the consumer.

Not enough resources to satisfy the needs and wants of the consumer. Scarcity

How will limited resources be used to satisfy people’s wants and needs?

Trade-Off or Opportunity Cost Something equal value or the next best alternative.

Decision Makers

Who actually makes the decisions? Economic Systems:

Controlled Economy Government Controlled

Traditional Economy Doing things how they have always been done.

Market Economy Private Ownership

Mixed Economy Combines controlled and market economy.

Private Enterprise System

Based on independent decision by a businesses and/or a consumers with only a limited government role regulating those relationship.

Characteristics

Resources are owned by the individual. Use of profit motive to generate more profit. Consumers purchase goods that will satisfy

their needs. Consumers use value in deciding what to

consume.

Demand What the consumer is willing to buy? $ = Demand

Supply What the producer is willing to produce? $ = Supply

Government Allows consumer and producers to make decisions without any

interference. Ensure equal treatment by enforcing laws and regulations.

Economic Forces Decision-Making Process in a Private

Enterprise System determines how a market operates.

See a need for a business opportunity, pursue that opportunity.

Economic Resources 4 Factors of Production:

Natural: Comes from the earth Labor: Human action involved in producing

goods and services. Captial: Building, Equipment, etc… Entrepreneurial: Idea for a product or service.

Types of Economic Conditions Define competition and monopoly. Identify the characteristics of oligopolies

and monopolistic competition.

All In….or Not Competition affects consumers and

suppliers alike… Excessive competition limits increase in

prices Two characteristics to determine economic

competition: Number of firms competing in the market Similarity between the products

Pure Competition Large number of suppliers offering very

similar products.

Price

Quantity

Monopoly One supplier offering a unique product.

Price

Quantity

Monopoly Government attempts to control any

business to maintain their products at a reasonable price.

Between the Extremes Oligopoly

Few businesses offer very similar products and services.

Competitive market gives the consumer a choice about what they want.

Oligopolies One business in an oligopoly will have little

influence over the price it can charge.

Price

Quantity

Oligopolies When there are a few firms in an oligopoly,

the total industry has much more control over price.

Price

Quantity

Monopolistic Competition Many firms competing with products that

are somewhat different.

Monopolistic Competition with few differences amongst products.

Price

Quantity

Great product differences, businesses have much more control over prices.

Price

Quantity

Understanding Competition Businesses in pure competition will not be

able to exercise much control in the market. Marketers will look for ways to differentiate

a product similar to the competitions.

Enhancing Economic Utility Define types of economic utility Explain how marketers use utility to

increase customer satisfaction.

Utility = Satisfaction Economic Utility:

Amount of satisfaction a consumer receives from the consumption of particular products or services.

Types of Utility Form Utility:

Change in the tangible part of a product or services.

Time Utility: Making the product or service available when the

consumer wants it.

Place Utility: Where the product and services is available.

Possession Utility: Affordability of the product or service.