September 27, 2007
Studying Part 1...Marketing .. how marketing is incorporated into economics theory.?.
Firstly, from a perfectly competitive firm in a perfectly competitive market
a few key assumptions -
Every small firm is facing elastic demand of the goods. these homogeneous firms have to accept the market price for the products they sell. they are not able to shape the marketing environment.
- They sell homogeneous product They produce at the point where MC = MR = P
4 assumptions of the theory of perfect competition.
1. Price - both buyer and seller cannot affect the price.
2. products are sold undifferentiated
3. Consumers have perfect information about their preference income, prices, product quality.
4. Perfect mobility of resources; i.e to say that companies can enter and exit the market freely
From these points, 3 theorms can be drawn out.
1. Price is not a strategic marketing tool for the individual firm as buyers and sellers cannot affect the price.
2. When a company sells undifferentiated products, price and product development are not important marketing
3. With perfect information, a company will not gain from informative promotion because consumers have perfect information.
According to this model, marketing shouldn't exist under perfect competition model
firstly, price there are companies that can affect the price e.g LV branded stuff.
secondly marketers differentiate the products by brand. and lastly, with the information overload situation, marketers will have to use promotional strategies ti draw customers attention and provide them with the relevant information for purchasing the product.
Therefore the theory of perfect competition can only explain marketing briefly.
However, marketers can study marketing under the models of imperfect competition.
This situation occurs for e.g in a oligopolistic or monopolistic competition, Companies are able to differentiate themselves and therefore are able to ask for higher price for their product as they are not as restrictive as neo-classical theory of perfect competition.
BO LIAO part 2
i did this picture taking while i was mugging rather bored... some upgrading construction taking place...
