Marketing Principles
Chapter 3: Economics & The Free
Enterprise System
Economics
The study of the choices & decisions
that affect making, distributing, and
using goods & services.
Why Economics is Important to
Marketing?
You must understand how the system
works to fully understand how
marketing works
Everyone has wants
• Economic Wants: Unfulfilled desires that
cost money to attain
• Noneconomic Wants: Unfullfilled desires
that do not cost money to attain.
• Marketing focuses on consumers’ economic
wants.
Producers & Businesses produce
or make available goods &
services to satisfy consumers’
economic needs & wants.
• Goods – Tangible(touch) products
• Services – Intangible(Can’t touch)
Goods & Services Must Have
Utility (usefulness) to Satisfy
Consumers’ Wants & Needs
• Marketing activities add utility to goods &
services through:
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Form Utility
Place Utility
Time Utility
Possession Utility
Information Utility
When there are more wants than resources
available a condition of Scarcity exists
• Scarcity – When economic wants outweigh
available resources.
• Economic Resources (Factors of Production) –
All the things used in producing goods & services.
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Land – All the Earth’s natural resources available.
Labor – All the people who work in the economy.
Capital – Money needed to start & operate a business.
Entrepreneurship – Skills of people who are willing to
risk their time & money to run a business.
Every Nation Must Confront
Scarcity by Answering 3 Basic
Economic Questions
• What goods & services should be
produced?
• How should goods & services be produced?
• For whom should the goods & services be
produced?
United States Economic System
• Free Enterprise System(Private Enterprise)(Market
System)(Capitalism): System in which individuals make
their own decisions regarding their economic choices.
• How Free Enterprise Answers Economic Questions:
– What? Determined by producers based on consumer demand
– How?
Determined by businesses(producers)
– Whom? Determined by businesses(producers)
• Communism(Command)-Government Controlled
opposite of a free enterprise system.
• Socialism – In between capitalism & communism.
Basic Characteristics of Free
Enterprise System
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Profit Motive
Risk
Competition
Freedom of Ownership
Minimal Government Involvement(Referee)
In a Market Oriented Economcy
Goods & Services are produced
based on consumer demand.
Demand: the amount of goods &
services consumers are willing & able
to buy at a given price.
Value of goods & services are
determined by demand & regulated
by supply & prices in a free
enterprise system
• Supply – The amount or quantity of goods
& services producers are willing to provide
at a given price.
• Price – Value set by the market. Supply &
demand work together to set prices for
goods & services.
Marketing’s function in the Free
Enterprise is to provide a bridge between
producers & consumers so exchange of
goods & services can occur
Marketing Process
This is the End of Our Economic
Tale!
WOO HOO!