Week 10

Market structure refers to the nature and degree o competition the market for goods and services.
Thestructures of market both for goods market and service (factor) market are determined by the nature of
competition prevailing in a particular market.

Market
•is a geographical area where a number of potential customer for a product or service exists,
•it is also a location where both the buyers and sellers come to track specific commodities.

Market
•is a place where goods and services you want can be bought. It is also a place where buyers and sellers meet
and transact business.

Kinds of market stracture

Pure Competition
(1) there is a large number of sellers and buyers of the commodity each too small to affect the price of the
commodity
(2) the outputs of all firms in the market are homogeneous, the product of any seller is considered as exactly
alike in all respects to the product of any other seller
(3)there is perfect mobility of resources, there is freedom of entry into and exit from the industry.

Monopolistic Competition
-refers to the market organization in which a relatively large number of small producers or suppliers are offering
similar but not identical products
•product differentiation leads some consumers to prefer the products of one produce in an industry over the
others.

Pure competition vs.

Monopolistic competition
•Pure competition requires hundreds, thousands, or even millions of producers.
•Monopolistic competition does not require the presence of thousands or millions of firms or
producers but only a fairly large number, say 15,25, 40, 50.

Oligopoly
•characterized by a small number of firms and a great deal of interdependence among them.

Classification of Oligopoly Markets

•Pure oligopoly - products produced by the various firms are identical
•Differentiated oligopoly - exists in industries where products are not homogeneous. This model is found in
most manufactured consumer goods.

Monopoly
*Pure monopoly exists when a single firm is the sole producer of a product or a service for which there are no
close substitutes.
Misconception on MONOPOLY •A monopolist can manipulate price and output, he will, therefore, charge the

highest price he can get.

MARKETING
-exchange between parties of either product, service or an idea to satisfy a need or a want.
•also providing goods and services to customers to meet their needs and wants while earning a profit for the
seller.

Five P's of Marketing

•Product - refers to goods or services
•Price - refers to how much the goods or services are
•Place - refers to where to distribute the products
•Promotion
•Personal Selling - (see steps in personal selling)
•Advertising - giving information to the public
•Public Relations

Steps in Personal Selling

•Preparation
•Prospecting
•Pre-approach
•Actual sales Presentation
•Post sale - creating a good relationship
with customer

Week 11
What is Imperfect Competition?
Imperfect competition is an economic concept used to describe marketplace conditions that render a market
than perfectly competitive, creating market inefficiencies that result in losses of economic value, In the real
world,markets are nearly always in a condition of imperfect competition to some extent. However, the term is
typically only used to describe markets where the level of competition among sellers is substantially below ideal
conditions,

What is Imperfect Competition?

A situation of imperfect competition exists whenever one of the fundamental characteristics of perfect
competition is missing. When there is perfect competition in a market, prices are controlled primarily by the
ordinary economic factors of supply and demand.
 Notably, the stock market may be viewed as a continually imperfect market because not all investors
have ready access to the same level of information regarding potential investments.
 Imperfect competition commonly exists when a market structure is in the form of monopolies,
duopolies, oligopolies, or monopsony (very rare).
Perfect Competition
 Prices in the marketplace are essentially controlled by the basic economicforces of supply and demand,
In particular, sellers do not have any significant ability to control the prices of their goods or services,
 Many different companies sell identical, or nearly identical, products or services. It means that buyers
have several choices when making purchases; havinq many suppliers of identical products is key to
perfect competition. Imperfect competition often results from a marketplace where there are
manysellers, Still, they are all selling unique goods or goods that are substantially dissimilar to any
goods sold by their competitors, start-up costs, or education and licensing requirements.
 American economist Joe S. Bain gave the definition of barriers to entry as "an advantage of established
sellers in an industry over potential entrant sellers, which is reflected in the extent to which established
sellers can persistently raise their prices above competitive levels without attracting new entrants to
enter the industry”.

Imperfect Competition Market Structures

 Market structures that effectively render competition imperfect are most often characterized by a lack of
competitive suppliers. Imperfect competition often exists as a result of extremely high barriers to entry
for new suppliers. For example, the airline industry has high barriers to entry due to the extremely high
cost of aircraft.

Imperfect Competition Market Structures

 The most extreme condition of imperfect competition exists when the market for a particular good or
service is a monopoly, one in which there is a sole supplier. A supplier that has a monopoly on the
provision of a good or service essentially has complete control over prices.
 Because it has no competition from other suppliers, the sole supplier can essentially set the price of its
goods or services at any level it desires, Monopolies often charge prices that provide them with
significantly higher profit margins than most companies operate with.

Imperfect Competition Market Structures

 A duopoly is a market structure in which there are only two suppliers, Although duopolies are somewhat
more competitive than monopolies, the level of competition is still far from perfect ,as the two suppliers
still have significant control of marketplace prices.
 An example of a duopoly exists in the United Kingdom's detergent market, where Procter & Gamble and
Unilever are virtually the only suppliers. The two suppliers in a duopoly often collude in price setting.

Imperfect Competition Market Structures

 Oligopolies are much more common than either monopolies or duopolies, In an oligopoly, there are
several - but a small, limited number - of suppliers. The market for cell phone service in the United
States is an example of an oligopoly, as it is essentially controlled by just a handful of suppliers. The
small number of suppliers, which limits buying choices for consumers, provides the suppliers with
substantial, although not complete, control over pricing.

Imperfect Competition Market Structures

 A rare form of imperfect competition is a monopsony. A monopsony is a single buyer, rather than any
supplier, who has great control over market prices. Government entities often enjoy a monopsony
position.
 For example, the central government in any country is usually the sole buyer of certain military
equipment. There may be multiple manufacturers selling such goods, but all the sellers are basically at
the mercy of whatever price the government is willing to pay for the goods.

Week 12
Role of Marketing in Economy
•Marketing plays an important function in the progress of an economy. It acts as a medium in the economic
growth of a country and helps in raising the standards of living of the people. Development of a nation can be
judged by the level of standard of living of its people. On this basis, an underdeveloped country may be stated
to be one which is characterized by factors like poverty, scarcity of goods and services etc.

Role of Marketing in Economy

•Marketing can play a major role in the economic development of a nation. It can motivate people to undertake
new activities and to set up enterprises for producing goods that are needed by the consumers. Marketing has
acquired a vital place for the economic expansion of the whole country. It has also become a requirement for
attaining the object of social welfare.

Role of Marketing in Economic Growth

•Marketing can help in overcoming obstacles posed by high prices due to imbalances in the levels of production
and consumption. In other words, marketing can help in finding out right type of products and services that a
firm should manufacture, the places where it should make such products obtainable for sale, the price at which
the products should be sold and the channels that should be used for moving the products to the final place of
expenditure or use. This connection between the business and expenditure centres, accelerates the economic
movement leading to higher incomes, more expenditure and increased savings and investment.

Role of Marketing in Economic Growth

•Marketing stimulates the aggregate demand thereby enlarges the size of market
•Delivery of standard of living to the society •Decrease in distribution cost
•Increasing employment opportunities •Increase in national income
•Protection against business slump

Delivery of Standard of Living

•Marketing discovers needs and wants of society, produces the goods and services according to these needs
creates demand for these goods and services. They go ahead and promote the goods making people aware about
them and creating a demand for the goods, encouraging customers to use them. Thus, it improves the standard
of living of the society.

Decrease in distribution cost

•Second important liability of marketing is control the cost of distribution. Through effective marketing the
companies can reduce their distribution costs to a great extent. Decrease in cost of distribution directly affects
the prices of products because the cost of distribution is an important part of the total price of the product.

Increasing employment opportunities

• Marketing comprises of advertising, sales, distribution, branding and many more activities. So the
development of marketing automatically gives rise to a need for people to work in several areas of marketing.
Thus the employment opportunities are born. Also successful operation marketing activities requires the
services of different enterprises and organisation such as wholesalers, retailers, transportation, storage, finance,
insurance and advertising. These services provide employment to a number of people.

Increase in national income

•Successful operation of marketing activities creates, maintains and increases the demand for goods and
services in society. To meet this increased demand the companies need to increase the level of production in
turn raising their income. This increase, in turn, increases the national income. Further effective marketing leads
to exports adding to the national income. This is beneficial to the whole society.

Protection against business slump

•Business slump cause unemployment, slackness in the success of business and great loss to economy.
Marketing helps in protecting society against all these problems.

What is a Business Cycle?

The business cycle is a periodic but irregular up and-down
movement in production and jobs.
A business cycle has two phases, expansion and recession,
and two turning point, a peak and
a trough.

How supply and demand drives the business cycle

• In the beginning: The expansion happens because consumers are confident in the economy. They believe that
employment is steady and income is guaranteed. As a result, they spend more, which leads to increased
demand, which leads to businesses hiring more employees and increasing capital expenditures to meet that
demand. Investors allocate more capital to assets,
increasing stock prices.

• Getting overheated: The expansionary phase hits a peak when the demand is greater than the supply, and
businesses take on additional risks to meet
increased demand and remain competitive.

Scaling back: When interest rates rise quickly, inflation increases too fast, or a financial crisis occurs, an
economy enters a contraction. The confidence that stimulated it quickly evaporates, replaced with dwindling
consumer confidence.
Individuals save money rather than spend, reducing demand, and businesses cut production and layoff
employees as their sales dry up. Investors sell stocks to avoid a drop in the value of their portfolios.

Hitting bottom: During the trough phase,demand and  production are at their lowest point. But eventually, needs
reassert themselves. Consumers slowly start to gain confidence as production and business activity starts to
improve, often spurred on by government policies and action. They begin to buy and invest, and the economy
enters a new expansion phase.

How governments influence business cycles

•The fact that business cycles move in natural phases doesn't mean they can't be influenced. Countries can and
do try to manage the various stages - slowing them down or speeding them up - using monetary policy and
fiscal policy. Fiscal policy is carried out by the government; monetary policy is carried out by a nation's central
bank.

Week 15 & 16

Theory of Consumer Behavior

Consumer Behavior

•Consumer theory is the study of how people decide to spend

Their money based on their individual preferences and budget

Constraints. A branch of microeconomics, consumer theory

Shows how individuals make choices, subject to how much

Income they have available to spend and the prices of goods and

Services.

•Understanding how consumers operate makes it easier for

Vendors to predict which of their products will sell more and

Enables economists to get a better grasp of the shape of the

Overall economy.

The law of diminishing marginal utility

•states that the more of any good is consumed in a given

Period, the less satisfaction (utility) is generated by

Consuming each additional (marginal) unit of the same good.

•utility – is the term for satisfaction in economics, it is the

Satisfaction or reward a product yields relative to its

Alternatives. It is a basis of choice.

•total utility – total amount of satisfaction obtained from

Consumption of a good or service. It comes from all units

Consumed.

•marginal utility comes only from the last unit consumed. It is

An additional satisfaction gained by the consumption or use of

One or more unit of something

Factors affecting consumer behavior

The study of consumer behaviour formally investigates

Individual qualities such as demographics, personality

Lifestyles, and behavioural variables (such as usage rates,

Usage occasion, loyalty, brand advocacy, and willingness

To provide referrals), in an attempt to understand people’s

Wants and consumption. Also investigated are the

Influences on the consumer, from groups such as family,

Friends, sports, and reference groups, to society in

General, including brand-influencers and opinion leaders.

Cultural factors

•exert the broadest and deepest influence on

Consumer behavior

•one of the most fundamental determinant of a

Person’s want and behavior.

•the child growing up in society learns a basic set

Of values, perceptions, preferences, and

Behaviors through a process of socialization

Involving the family and other key institutions.