Marketing Management Lecture Week 2 FALL 2010

Marketing Management Lecture Week 2 FALL 2010 - MARKETING...

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Professor Arjun Chakravarti Fall 2010 MARKETING MANAGEMENT WEEK 2 : Economic Essentials
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Learning Outcomes Basic skills for solving microeconomic problems Understand basic concepts: “demand,” “supply,” “equilibrium” Understand how changes in supply and demand alter equilibrium Calculate Elasticity: demand, income, cross price Conceptualize supply and demand shifts (vs. movement up curves) Marketing math : contributions, margins Market competition: basic ideas
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Microeconomics Texts Any “Intermediate Microeconomics” text: Some popular authors: Don Waldman Hal Varian Greg Mankiw Robert Frank Besanko et al. CHECK TO SEE WHICH BOOK IS BEING USED AT IIT.
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Macroeconomics vs. Microeconomics Macroeconomics: Top down analysis How aggregates affect decision making across the entire economy Prices of critical inputs in the economy Links between demand, wages, and output. Banks, credit, liquidity ‐‐‐ > demand for money? Government spending, Inflation vs. Deflation Micro foundations of macro VERY useful for marketing and strategic decision making These are critical factors in business decision-making. Changes in the Macro economy do not shock businesses in equal ways. - Cash versus credit structure - Customers may have differential access to credit .
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Macroeconomics vs. Microeconomics Microeconomics: Bottom up analysis of individuals Identify the consumer or firm’s goals. A normative approach: how consumers/firms should make decisions if they want to maximize their goal. Using positive analysis: facts from data Individuals and firm level activities consumers or firms set goals (e.g., profitability) and make decisions. Industrial organization and relative market power (perfect competition, monopoly, oligopoly) Price discrimination strategies Game theory: optimal methods of strategic interaction between rational players with varying levels of information
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Markets and Industries Markets are defined from a demand side perspective How do consumers see your product? What are its relevant substitutes and complements for using your product? Examples? Industries are defined from the supply side perspective American Airlines and Amtrak can serve the same market but are in different industries. Which skills and capacities are required to succeed in the industry?
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Economic models Abstract away from the complexities of the real world and capturing its essential features. Occam’s Razor Setting up basic economic models: 1. What question are you are trying to answer? e.g., The quantity demanded of your product This information is called a dependent or endogenous variable 2. What factors affect Quantity demanded of your product? e.g., in the most simple model of the world, it’s the price of
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This note was uploaded on 11/07/2011 for the course ECON 101 taught by Professor Johnson during the Spring '11 term at Sciences Po.

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Marketing Management Lecture Week 2 FALL 2010 - MARKETING...

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