Economics of Marketing Chapter 3 & 4 Marketing Essentials

Principles of Free Enterprise System Freedom of Ownership Competition RiskProfit

Freedom of Ownership – personal property, business property, intellectual property Competition – forces businesses to produce better-quality goods/services at reasonable prices Risk – the potential for loss or failure in relation to the potential for improved earnings Profit – the money earned from conducting business after all costs and expenses have been paid (Sales – Expenses = Profit)

Competition Models Price Lowest price for same product Primary focus Non-Price QualityLocationExpertise Monopoly Exclusive Control Sherman Antitrust Act Government Allowed

Supporter of Business Provider of Services CompetitorRegulator Role of Government

Coin Activity At your table, decide how to divide the coins among the people sitting there. All students at the table must agree with the distribution method for it to be successful.

Determining Price Supply – amount of goods producers are willing to make and sell Demand – consumer willingness and ability to buy products Surplus – supply exceeds demand Shortage – demand exceeds supply Equilibrium – products supplied is equal to amount being demanded

Economy Comparison Market Economy Command Economy No government involvement What? – consumers decide How? – businesses decide For whom? - money Government makes all decisions What? How? For whom? – the government (often a dictator or small, powerful group) decides

Economic Philosophies Capitalism Same as free enterprise Democratic Some social programs Socialism Government keeps prices low Government runs keep industries Many social programs Communism Assigned jobs Schooling, housing decided for you Military force holds government

Communist Manifesto Is there a part with which you agree? Is there a part with which you disagree? Is there a part that surprised you? What would be the greatest challenge to this transformation?

The Business Cycle ProsperityRecessionDepressionRecovery

Factors of Production Natural Resources – provided on the earth Human Resources – people, workforce Capital Resources – items, money Entrepreneurship – ideas, ingenuity