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Professor of english : Mr TOUAHAR
Prepared by . ***************** .

Option : Marketing











Economics is the social science concerned with the analysis of

commercial activities and with how goods and services are produced.
The field of economics studies how the things people need and want
are made and brought to them. It also studies how people and
nations choose the things they buy from among the many things they
In all countries, the resources used to produce goods and services are
scarce. That is, no nation has enough farms, factories, or workers to
produce everything that everyone would like. Money is also scarce.
Few people have enough money to buy everything they want when
they want it. Therefore, people everywhere must choose the best
possible way to use their resources and money. Children may have to
choose whether to spend their allowance on a film or a hamburger.
Shopkeepers may have to choose whether to take a summer holiday
or to use their savings to buy more goods. A nation may have to
choose whether to use tax-payers' money to build more roads or more
submarines. In economic terms, the children, the shopkeepers, and
the nation all must economize in order to satisfy their most important
needs and wants. This means they must try to use the resources they
have to produce the things they most want.

Economists (specialists in economics) define economics as the study

of how goods and services get produced and how they are distributed.
By goods and services, economists mean everything that can be
bought and sold. By produced, they mean the processing and making
of goods and services. By distributed, they mean the way in which
goods and services are divided among people.


Every nation must organize the production and distribution of goods

and services wanted by its citizens. To do this, a nation's economic
system must solve four basic problems: (1) What shall be produced?
(2) How shall goods and services be produced? (3) Who shall get the
goods and services? and (4) How fast shall the economy grow?
What shall be produced? No nation can produce enough goods and
services to satisfy all its people. But which goods and services are
most important? Should land be used to rear animals or grow
wheat? Should factories be used to produce tractors, or television

How shall goods and services be produced? Should each family grow
its own food and make its own clothing? Or should special industries
be developed to provide these products? Should many workers be
used in an industry? Or should more machines be used instead?

Who shall get the goods and services? Should everyone have an
equal share of goods and services? Which goods and services should
go only to people who can afford to buy them? Which goods and
services should be distributed in some other way?

How fast shall the economy grow? An economy grows when it

produces more goods and services. A nation must decide what
proportion of its scarce resources should be used to build factories
and machines and provide more education, all of which will increase
future production. How much of a nation's resources should be used
to produce goods and services, such as food and clothing, for
immediate use? In addition, the nation must decide how to avoid
unemployment and other economic setbacks that waste resources.


An economy must grow to provide people with an increasing

standard of living--that is, more and better goods and services.
Making the economy grow. Four main elements make it possible for
nations to produce goods and services. These elements, called
productive resources, are: (1) natural resources, (2) capital, (3) a
labour force, and (4) technology. Economists define natural
resources as all land and raw materials, such as minerals, water, and
sunlight. Capital includes factories, tools, supplies, and equipment.
Labour force means all people who work or are seeking work, and
their education and skills. Technology refers to scientific and
business research and inventions.

In order to grow, a nation's economy must add to its productive

resources. For example, a nation must use some of its resources to
build factories, heavy equipment, and other capital goods. A nation
also must develop additional natural resources, create new
technologies, and train scientists, workers, and business managers,
who will direct future production. The knowledge of these people is
known as human capital.

Measuring economic growth. The value of all goods and services

produced in any year makes up a nation's gross domestic product.
An economy's rate of growth is measured by the change in its gross
domestic product over a period, usually year on year. In the period
1970 to 1988, the gross domestic products of different countries grew
at widely different average rates, after adjustments were made for
inflation. The following rates were achieved: the United Kingdom
(UK) 2.2 per cent, the United States 2.9 per cent, Ireland 3.0 per cent,
Australia 3.3 per cent, Canada 4.4 per cent, Malaysia 6.5 per cent,
Singapore 8.0 per cent, and South Africa 9.2 per cent.

Another way of measuring a nation's economic growth is to study the

standard of living of its people. To judge standard of living,
economists sometimes divide a nation's total gross domestic product
by its entire population. The resulting figure is called the per capita
GNP. The per capita GNP of a nation is the value of goods and
services each person would receive if all the goods and services
produced in the nation that year were divided evenly among all the


Different economic systems have developed because nations have

never agreed on how to solve their basic economic problems. Three
important economic systems today are (1) capitalism, (2) mixed
economies, and (3) Communism. The economies of many countries
include elements from several different economic systems.

Capitalism is the economic system of many countries throughout the

world. It is called capitalism because an individual can own land and
such capital as factories, buildings, and railways. Capitalism is also
known as free enterprise because it allows people to carry out their
economic activities largely free from government control.

The Scottish economist Adam Smith first stated the principles of the
capitalist system in the 1700's. Smith believed that governments
should not interfere in most business affairs. He said the desire of
business people to earn a profit, when regulated by competition,
would work almost like an "invisible hand" to produce what
consumers want. Smith's philosophy is known as laissez faire
Adam Smith's emphasis on individual economic freedom still forms
the basis of capitalism. But the growth and complexity of modern
businesses, cities, and technologies have led people to give the
government more economic duties than Smith gave it.

Mixed economies involve more government control and planning

than do capitalist economies. In a mixed economy, the government
often owns and runs such important industries as transport,
electricity, gas, and water. Most other industries may be privately

Communism, in its traditional form, is based on government

ownership of nearly all productive resources and government control
of all important economic activity. Government planners make all
decisions about producing, pricing, and distributing goods. However,
in many countries where this system has been adopted, the economy
has not prospered. In the mid-1980's, China began to relax its
governmental control over business activity and prices. In the late
1980's and early 1990's, governments rejecting Communist principles
succeeded Communist governments in many Eastern European
countries and the Soviet Union.


Early beginnings. People have been interested in economic problems

since earliest times. One of the earliest socio-economic systems
(systems that involve both social and economic factors) was
manorialism. Under the manorial system, landlords rented out land
to tenants or employed people to do work on the land in return for
wages. This system still operates in some countries today.
Manorialism started at the end of the Roman Empire and became
widespread in western Europe.

The first major theories about a nation's economy were not

developed until the 1500's, the beginning of the period of
mercantilism. The mercantilists believed that a government should
regulate economic activities to establish a favourable balance of
trade. They said nations could increase money supply by exporting
more products than they imported.
During the 1700's, a group of French writers known as physiocrats
attacked mercantilism. The physiocrats believed that governments
should interfere less in economic life. They were the first economists
to use the term laissez faire to mean noninterference by the
government. The physiocrats also began the first organized study of
how economies work.

The classical economists. Most economists today consider Adam

Smith to be the father of modern economics. Smith, a Scottish
professor of philosophy, built on some of the ideas of the physiocrats.
Smith's book The Wealth of Nations (1776) includes many ideas that
economists still accept as the basis for private enterprise. Smith
believed that free competition and free trade help an economy grow.
He said the government's main role in economic life should be to
assure effective competition. Smith and his followers became known
as classical economists.

Three British economists of the late 1700's and the 1800's wrote
particularly influential works. David Ricardo published strong
arguments for free trade among nations. Thomas Robert Malthus
challenged some of Smith's ideas but developed others further.
Malthus warned that if populations continued to grow, nations
someday would not be able to produce enough to feed all the people.
John Stuart Mill proposed that profits be divided more equally
among employers and workers.

Karl Marx and Communism. Some writers disagreed with the idea
that competition would lead to economic progress. The most
influential was Karl Marx, a German philosopher of the 1800's. In
his book Das Kapital (Capital), Marx interpreted human history as a
struggle between the ruling class and the working class. He declared
that free enterprise would lead to increasingly severe depressions,
and eventually to a revolution by the workers. In the Communist
Manifesto, Marx and his friend Friedrich Engels called for an
economy in which the government would own most of the property.
Marx's theories provided the basis for the development of

New solutions for old problems. During the late 1800's and the early
1900's, economists began to use scientific methods to study economic
problems. In France, Leon Walras worked out a mathematical
statement to show how each part of an economy is related to all the
other parts. Wesley Clair Mitchell, an American, urged economists
to use statistics in testing their theories. Mitchell also studied booms
and depressions.

The Great Depression of the 1930's caused economists to seek a new

explanation of depressions. John Maynard Keynes, a British
economist, attacked the idea that free markets always lead to
prosperity and full employment. In The General Theory of
Employment, Interest and Money, Keynes suggested that
governments could help end depressions by increasing their own
During the 1960's and 1970's, a group of economists called
monetarists rejected many of the theories of Keynes and his
followers. Instead, the monetarists urged that governments increase
the money supply at a constant rate to stabilize prices and promote
economic growth. Milton Friedman, an American economist, became
the leading spokesman for monetarism.

Research today generally centres on understanding the relationship

between various parts of the economy. Economists base their
findings on observation, on case studies, and on other methods of
research. Many economists emphasize the use of mathematics and
statistics in testing economic theories. Their method is known as
econometrics. Economic analysis has been applied to many problems
that seem unrelated to production, such as education, family life, and
government. Whenever resources available to achieve an objective
are limited, economic analysis may be useful.



Marketing is the process by which sellers find buyers and by which

goods and services move from producers to consumers. There are
many marketing activities. For example, advertising and selling are
part of the marketing process. Other marketing activities include
financing by banks and deliveries to shops and homes. Marketing is
so important to industry that about half the cost of goods and
services results from the marketing process.

Consumers in most countries can choose from a huge variety of

products and services. Therefore, a company must have an effective
marketing programme to make its products and services attractive to
customers. Every growing business engages in five major marketing
activities: (1) market research, (2) product development, (3)
distribution, (4) pricing, and (5) promotion.


Market research is the study of the probable users of a product or

service. Such potential customers are called a market. It also
examines competitive products and the way in which they are sold
and distributed. There are many sources of market information. For
example, government statistics about population and income indicate
the size of a market and its purchasing power.


Product development includes determining the various goods to be

offered, as well as developing the products themselves.
Manufacturers continually meet the demands of the public by adding
new products, changing existing ones, and dropping others.

Distribution is the movement of goods and services from producer to
consumer. A manufacturer must establish a system that keeps
products moving steadily from the factory to the customer. Such a
system is called a marketing channel or a channel of distribution.

Many types of companies take part in distribution. They include

wholesalers, who sell large quantities of goods to retailers. The
retailers, in turn, sell small numbers of products to consumers.
Independent dealers and agents buy goods from manufacturers in
large quantities and sell them to retail dealers in small quantities.
Other firms provide such services as financing, transportation, and


Pricing. When setting the price of a product, most manufacturers

start with their unit production cost, the expense of making one unit
of the item. They add a percentage of this cost to provide a profit for
themselves. Each firm adds an amount that covers its expenses and
enables it to make a profit. The amount added at each stage is called
a markup. The final selling price of an item equals its production
cost plus the total of the markups. See PRICE; PROFIT.

Some people believe a large part of the money spent on marketing is

wasted. But most economists believe the marketing process actually
benefits consumers. For example, market research helps industry
offer what customers need and want. Marketing also provides
consumers with shopping information and makes products available
in convenient quantities at nearby locations.
Promotion includes advertising, catalogues, coupons, direct-mail, in-
store displays, and door-to-door sales. Companies engage in a variety
of promotional activities to inform customers about products and
services and to persuade them to buy. See the articles on
ADVERTISING and SALESMANSHIP for more information about
this phase of marketing


Market research is the process of gathering and analysing

information to help business firms and other organizations make
marketing decisions. Business executives use market research to help
them identify markets (potential customers) for their products and
decide what marketing methods to use. Government officials use
such research to develop regulations regarding advertising, other
sales practices, and product safety.

Market research services are provided by several kinds of companies,

including advertising agencies, management consultants, and
specialized market research organizations. In addition, many large
business companies have their own market research department.

Market researchers estimate the demand for new products and

services, describe the characteristics of probable customers, and
measure potential sales. They determine how prices influence
demand, and they test the effectiveness of current and proposed
advertising. Market researchers also assess a company's sales
personnel and analyse the public "image" of a company and its
A market research study begins with a statement of the problem that
the client wants to solve. This statement leads to a detailed definition
of the information to be gathered. There are two types of market
research information, secondary data and primary data.

Secondary data are statistics and other information that are already
available from such sources as government agencies and universities.
To save time and money, market researchers use secondary sources
as much as they can. Primary data are data that must be obtained
through research. The chief techniques for gathering such data
include mail questionnaires, interviews, retail store shelf audits, use
of electronic scanners at retail checkout counters, and direct
observation in stores. The researchers design and test research
materials, such as questionnaires or guides for interviewers. Finally,
they collect the data, analyse the information, and report the results
of their study. The computer is an important tool in analysing
market research data. Market research can reduce the risk involved
in many business decisions, but some risk always remains.

Additional resources

Bungum, Jane. Money and Financial Institutions. Lerner 1991.

Gall. Junior Worldmark Encyclopedia of the Nations. Gale

Research, Detroit, Michigan, U.S.A., 1995.
Rendon, Marion and Kranz, Rachel. Straight Talk About Money.
Facts On File 1992. Guidelines for managing personal finances.

Silk, Leonard. Economics in Plain English. Rev. ed. Simon &

Schuster 1986. Paperback.

Young, Robin R. The Stock Market. Lerner 1991. Explains the

basics of stock market investment.

Backhouse, Roger. The History of Modern Economic Analysis.

Blackwell, Cambridge, Massachusetts, U.S.A., 1997.

Blinder, Alan S. Hard Heads Soft Hearts: Tough-Minded Economics

for a Just Society. Addison-Wesley 1987. Argues in favour of
economic policy that promotes both efficiency and social welfare.

Calleo, David P. The Bankrupting of America: How the Federal

Budget Is Impoverishing the Nation. Morrow 1992. Analysis of the
causes and consequences of the federal deficit.

Friedman, Milton and Rose. Free to Choose. Harcourt 1980.

Argues for free market economy.

Galbraith, John K. Economics in Perspective: A Critical History.

Houghton 1988.

Heilbroner, Robert L. and Thurow, Lester C. Economics Explained.

Simon & Schuster 1994. Discusses international monetary systems,
currency fluctuations, inflation, and unemployment.
Keynes, John Maynard. The General Theory of Employment,
Interest, and Money. Harcourt 1965.

Smith, Adam. The Wealth of Nations. Random House. 1993.

Thurow, Lester C. Head to Head: The Coming Economic Battle

Among Japan, Europe, and America. Morrow 1992. A look at the
possible future of global economic competition.

Baker, Michael J. Marketing - Theory and Practice. MacMillan,

Basingstoke, Hampshire, UK, 1983.

Bennet, Peter D. Marketing. McGraw Hill, Maidenhead, Berkshire,

UK, 1988.

Butler, J.T.F. Marketing - An Introduction. Oxford Business

Publishing, Oxford, UK, 1990.

Hassan. Global Marketing. Ed 2. Harcourt Brace College

Publishers, Orlando, Florida, U.S.A., 1996.