1. © 2009 South-Western, Cengage LearningMARKETING 1 Chapter 3 MARKETING BEGINS WITH ECONOMICS 3-1Scarcity and Private Enterprise 3-2Observing the Law of Supply and Demand 3-3Types of Economic Competition 3-4Enhancing Economic Utility CHAPTER 3

2. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 2 Focus Questions: Does the use of a Chinese language headline increase or decrease your interest in the advertisement? What is the key message Morgan Stanley is trying to communicate? Offer examples of how the growth of the economies in other countries around the world affects U.S. businesses and consumers. ©MORGAN STANLEY Q.O.D. 10/2/13

3. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 3 SCARCITY AND PRIVATE ENTERPRISE GOALS Identify the basic economic problem. Describe how America’s private enterprise economy works. 3-1

4. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 4 The Importance of Economic Understanding The basic economic problem Who makes the decisions? Controlled economy—government (N. Korea, China, Cuba) Free economy—individuals (United States, Japan) Mixed economy—government and private enterprise (European Union, “Russia”)

5. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 5 America’s Private Enterprise Economy Characteristics Consumers Producers Government Economic forces

6. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 6 OBSERVING THE LAW OF SUPPLY AND DEMAND GOALS Explain microeconomics and the concept of consumer demand. Identify factors that affect supply and its relationship to demand. 3-2

7. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 7 Macroeconomics MACROeconomics studies the economic behavior and relationships of an entire society.

8. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 8 Microeconomics MICROeconomics is the study of relationships between individual customers and producers.

9. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 9 Microeconomics and Consumer Demand Factors affecting DEMAND 1.Needs & wants 2.Available supply of products & services to supply needs 3.Availability of alternative products Analyzing demand curves Demand curve Law of demand Economic market

10. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 10 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 Demand Curve for Movies

11. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 11 Supplying the Product Handling the competition How many others are offering the same product? Economic resources- natural resources, capital, equipment, and labor. Analyzing supply curve Supply curve-relationship between $ & Quantity. Law of supply

12. © 2009 South-Western, Cengage LearningMARKETING Example Organic Produce- Sells for higher prices than conventionally produced goods… Why? Consumer demand for organic produce is increasing faster than their supply Chapter 3 12

13. © 2009 South-Western, Cengage LearningMARKETING Factors Affecting SUPPLY 1.Possibility of Profit 2.Amount of Competition 3.Capability of developing & marketing the products or services. Chapter 3 13

14. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 14 Price $105 90 75 60 45 30 15 10,000 Quantity 20,00030,00040,00050,00060,00070,00080,000 Supply Curve for Cell Phones

15. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 15 Intersecting Supply and Demand Supply Demand Market price

16. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 16 Demand Curve for Notebook Computers Price $2,100 1,800 1,500 1,200 900 600 300 100 Quantity (in 000s) 200300400500600700800

17. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 17 Supply Curve for Notebook Computers Price $2,100 1,800 1,500 1,200 900 600 300 100 Quantity (in 000s) 200300400500600700800

18. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 18 Price $2,100 1,800 1,500 1,200 900 600 300 100 Quantity (in 000s) 200300400500600700800 Market Price for Notebook Computers DemandSupply Market Price

19. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 19 TYPES OF ECONOMIC COMPETITION GOALS Define pure competition and monopoly. Explain the characteristics of oligopolies and monopolistic competition. 3-3

20. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 20 All-Out Competition or No Competition At All Pure competition Monopoly

21. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 21 Price Quantity Demand Curve for One Company in Pure Competition

22. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 22 Price Quantity Demand Curve for a Monopoly

23. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 23 Between the Extremes Oligopolies Monopolistic competition Understanding the competition

24. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 24 Demand Curve for One Company in an Oligopoly Price Quantity

25. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 25 Demand Curve for the Industry in an Oligopoly Price Quantity

26. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 26 Price Quantity Demand Curve for Monopolistic Competition with Few Product Differences

27. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 27 Demand Curve for Monopolistic Competition with Greater Product Differences Price Quantity

28. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 28 ENHANCING ECONOMIC UTILITY GOALS Define four types of economic utility. Explain how marketers use utility to increase customer satisfaction. 3-4

29. © 2009 South-Western, Cengage LearningMARKETING Chapter 3 29 Utility Means Satisfaction Economic utility Form utility Time utility Place utility Possession utility