Want Economics In Marketing?

What Are Economics In Marketing?

Marketing exists because resources are scarce. Economics is the study of the satisfaction of wants through the use of scarce resources. It analyses the processes and consequences of this want-satisfaction in a scientific manner. The connection between the two disciplines lies in the fact that marketing exists because resources are scarce. Marketing economics is the science of markets including product, pricing, promotion and place. Marketing is often viewed as an art that includes social elements such as influencing and creative elements such as design. A market economy is an economic system in which economic decisions and the pricing of goods and services are guided by the interactions of a country's individual citizens and businesses (Martinez and Fernandez 2019).

Hire Experts

How Economics Influence On Marketing?

Inflation, demand and supply, interest rates, taxes and recession all influence how much money people have to spend as well as the price of your products. These factors have a direct impact on the market as well as your customers. Some of the biggest economic factors that affect marketing are demand and supply. Often, the goal of a marketing campaign is to drive up demand. When demand is high, the price of a product can also be high, increasing profitability for a business. When demand is low, the price lowers too. When there is a limited supply of materials, either due to manufacturing or environmental issues, the demand increases due to the availability (Conick 2017).

Why Is Economics Important In Marketing?

The economy has a direct impact on the way marketers push their products to consumers. Understanding the connection between marketing and economics can help business owners allocate their marketing resources and respond to changes in the economic climate. Economists use a concept called the law of diminishing returns to explain how resources can be allocated to maximize return on investment. Over time, one may find that the cost of marketing or advertising a certain product meets or exceeds the amount of money they are generating from selling that product (Martinez and Fernandez 2019).

This can happen when a competitor enters the field, when consumer tastes change or when the price point is too low or too high, explains the Arizona Republic's small-business portal. When customers stop buying a product at a fast enough rate, they enter into diminishing returns. In other words, the amount they are garnering from their marketing investment is shrinking (Martinez and Fernandez 2019).

Click To Connect

What Are The Types of Market In Economics?

Market structures provide a starting point for assessing economic environments in business. An understanding of how companies and markets work allows business professionals and leaders to accurately judge industry and market news, policy changes and legislation and how the economy shapes important decisions. There are four basic types of market structures (Utterback, Pistorius and Yilmaz, 2019).

Pure Competition- Pure or perfect competition is a market structure defined by a large number of small firms competing against each other. A single firm doesn’t have significant marketing power, and as a result, the industry produces an optimal level of output because firms don’t have the ability to influence market prices. Supply and demand determine the amount of goods and services produced, along with the market prices set by the companies in the market. Products are identical to competitors’ products, and there are no significant barriers to entering and exiting the market (Utterback, Pistorius and Yilmaz, 2019). 

Monopolistic Competition- Like pure competition, monopolistic competition is a market structure referring to a large number of small firms competing against each other. However, firms in monopolistic competition sell similar but highly differentiated products. Lowest possible cost production, which leads to optimal output in a pure competition market structure, is not assumed (Bertoletti and Etro 2017).

Oligopoly- An oligopoly is dominated by a few firms, resulting in limited competition. They can collaborate with or compete against each other to use their collective market power to drive up prices and earn more profit (Eichner 2017).

Pure Monopoly- A monopoly exists when there’s a single firm that controls the entire market. The firm and industry are synonymous. This firm is the sole producer of a product, and there are no close substitutes. Because there are no alternatives, the firm has the highest level of market power. Hence, monopolists often reduce output, increase prices and earn more profit (Gilbert 2018).

Physical consumer markets

Physical market is a condition in which buyers can meet face to face with the sellers and obtaining the chosen stock from them in return for money. Physical consumer markets consist primarily of products that people use as part of their everyday lives. Anytime someone purchases a product for their own use, they become part of the consumer market. The market typically is divided into four different categories: food, beverages, transportation and retail (LAKSHMI, Head and Phil 2018).

Physical business markets

Physical business strategy market is a set up where buyers can physically meet the sellers and purchase the desired merchandise from them in exchange of money. Shopping malls, department stores, retail stores are examples of physical markets (LAKSHMI, Head and Phil 2018).

Non physical markets

Non Physical Markets also known as Virtual markets - In such markets, buyers purchase goods and services through internet. In such a market the buyers and sellers do not meet or interact physically, instead the transaction is done through internet. Examples - Rediff shopping, eBay etc (LAKSHMI, Head and Phil 2018).

Financial markets

Financial Markets include any place or system that provides buyers and sellers the means to trade financial instruments, including bonds, equities, the various international currencies, and derivatives. Financial markets facilitate the interaction between those who need capital with those who have capital to invest (Pilbeam 2018).

Types of Financial Markets include

• Stock market- The stock market trades shares of ownership of public companies.
• Bond market- The bond market offers opportunities for companies and the government to secure money to finance a project or investment.
• Commodities market- A commodity market involves buying, selling, or trading a raw product, such as oil, gold, or coffee. There are hard commodities, which are generally natural resources, and soft commodities, which are livestock or agricultural goods.
• Derivatives market- Derivatives are complex financial contracts based on the value of an underlying asset, group of assets or benchmark. These underlying assets can include stocks, bonds, commodities, currencies, interest rates, market indexes or even cryptocurrencies (Pilbeam 2018).

Order Now

References

Bertoletti, P. and Etro, F., 2017. Monopolistic competition when income matters. The Economic Journal, 127(603), pp.1217-1243.

Conick, H., 2017. Read this story to learn how behavioral economics can improve marketing. Retrieved from.

Eichner, A.S., 2017. The megacorp and oligopoly: micro foundations of macro dynamics. Routledge.

Gilbert, S., 2018. Pure Monopoly Model. In Multi-Market Antitrust Economics (pp. 15-33). Palgrave Macmillan, Cham.

LAKSHMI, K.D., Head, P.G. and Phil, M., 2018. E-COMMERCE AND ITS IMPACT ON MARKETS AND RETAILERS. IJRAR-International Journal of Research and Analytical Reviews (IJRAR), 5(3), pp.234-239.

Martinez, E.L. and Fernandez, F.J.B., 2019. Economics of production, marketing and utilization. In Corn (pp. 87-107). AACC International Press.

Pilbeam, K., 2018. Finance and financial markets. Bloomsbury Publishing.

Utterback, J.M., Pistorius, C. and Yilmaz, E., 2019. The Dynamics of Competition and of the Diffusion of Innovations. Pistorius, E. Yilmaz.–2018.