EM - Economics in Marketing [OVERVIEW]

Economics in Marketing

Introduction

Businesses don't operate in a vacuum; they're influenced by a number of external factors. These include the economy, government, consumer trends, and public pressure to act as good corporate citizens. The figure "Business and Its Environment" (to the left) sums up the relationship among the participants in a business, its functional areas, and the external forces that influence its activities. One industry that's clearly affected by all these factors is the fast-food industry. A strong economy means people have more money to eat out at places where food standards are monitored by a government agency, the Food and Drug Administration. Preferences for certain types of foods are influenced by consumer trends (eating fried foods might be OK one year and out the next). Finally, a number of decisions made by the industry result from its desire to be good corporate citizens. For example, several fast-food chains have responded to environmental concerns by eliminating Styrofoam containers. As you move through this content, you'll learn more about these influences on business.

Essential Questions

1. What is the relationship between marketing and the economy?
2. What are the differences between economic concepts and economic activities?
3. What are the differences between economic goods and economic services?
4. What are the major types of economic resources?
5. What are the types of economic utility created by business activities?
6. What are the various economic systems and the effects on what, how, and for whom goods and services will be produced?
7. How do the various economic systems (traditional, market, command, and mixed) affect private ownership and the role of government?
8. How do the measurements of an economy relate to the marketing process?
9. What are the laws of supply and demand and how do they interact to set prices?
10. How do the functions of pricing affect the economic markets?

Key Terms

• Economy - The system of production and distribution and consumption. The overall measure of a currency system.
• Free market - Any market in which trade is unregulated an economic system free from government intervention. Allows supply and demand to regulate prices, wages, etc, rather than government.
• Competition - The rivalry among sellers trying to achieve such goals as increasing profits, market share, and sales volume by varying the elements of the marketing mix price, product, distribution, and promotion. It is the product of vying for customers by the pursuit of differential advantage, i.e., changing to better meet consumer wants and needs. In economic theory, various competitive states such as monopolistic competition, oligopoly, perfect competition, and monopoly are delineated based on the degree of control that sellers have over price.
• Profit - The excess of total revenues over total costs in a given time period.
• Price Competition - The rivalry among firms seeking to attract customers on the basis of price, rather than by the use of other marketing factors.
• Factors of Production - The productive resources of an economy, usually classified as land, labor, and capital. Entrepreneurship is frequently included as a fourth factor of production
• Utility - The usefulness received by consumers from buying, owning, or consuming a product.
• Place Utility - The increased usefulness created by marketing through making a product available at the place consumers want.
• Possession Utility - The increased usefulness created by marketing through making it possible for a consumer to own, use, and consume a product. It is also called ownership utility.
• Time Utility - The increased satisfaction created by marketing through making products available at the time consumers want them.
• Market Economy - 1. (environments definition) An economic system in which decisions concerning production and consumption are made by individuals and organizations without intervention by a central planning authority. The economic ''laws of supply and demand'' operate relatively unrestrained by governmental direction, as contrasted with a planned economy. 2. (economic definition) An economy in which decisions about what and how much to be produced and marketed are made by the collective action of competitors vying for consumer patronage.
• Mixed Economy - a system in which both the state and private sector direct the way goods and services are bought and sold
• Communism - a political philosophy or ideology advocating holding the production of resources collectively.
• Socialism - Any of various economic and political philosophies that support social equality, collective decision-making, distribution of income based on contribution and public ownership of productive capital and natural resources, as advocated by socialists.
• Capitalism - a socio-economic system based on the abstraction of resources into the form of privately-owned money, wealth, and goods, with economic decisions made largely through the operation of a market unregulated by the state.
• Productivity - A measure of the economic output per unit of input of some resource, e.g., the economic output per hour of human labor.
• Gross Domestic Product (GDP) - An estimate of the total national output of goods and services produced in a single country in a given time period and valued at market price.
• Gross National Product (GNP) - The money value of a nation's entire output of final commodities and services in a given period.
• Consumer Price Index (CPI) - A statistical measure maintained by the U.S. government that shows the trend of prices of goods and services (a market basket) purchased by consumers.
• Producer Price Index (PPI) - A monthly price index of about 2,800 commodities prepared by the U.S. Bureau of Labor Statistics, formerly known as the wholesale price index.
• Inflation - An economic condition characterized by a continuous upward movement of the general price level. An increase in prices in a country that results in a decline in the purchasing power of consumers.
• Standard of Living - relative measure of the general well being of a person or group.
• Unemployment Rate - the percent of the total labor force without a job.
• Supply - A schedule of the amounts of a good that would be offered for sale at all possible prices at any one instance of time. The number of units of a product that will be put on the market over a period of time.
• Demand - A schedule of the amounts that buyers would be willing to purchase at a corresponding schedule of prices, in a given market at a given time. The number of units of a product sold in a market over a period of time.
• Elastic - 1. A situation in which a cut in price increases the quantity taken in the market enough that total revenue is increased. 2. A situation in which a given change in the price of an economic good is associated with a more than proportionate change in the quantity that buyers would purchase. 3. A situation in which the percentage of quantity taken ''stretches'' more than the percentage drop in price.
• Inelastic - 1. A situation in which a cut in price yields such a small increase in quantity taken by the market that total revenue decreases. 2. A situation in which the percentage of quantity taken in the market ''stretches'' less than the percentage drop in price.
• Equilibrium - A situation in which the quantity and price offered by sellers equals the quantity and price taken by buyers.

[CC BY 4.0] UNLESS OTHERWISE NOTED | IMAGES: LICENSED AND USED ACCORDING TO TERMS OF SUBSCRIPTION