eco1000

Lectures 2
Diet cola
1952: Kirsch “No cal”
1. Customers
2. Competition (they may steal your idea)
3. Trends and market change

Start in strange unappealing niche positioning : sold as “medicine to diabetics and acne teenagers

Pay attention to

Bought by calories conscious consumers

Why
Distribution 1964 - Coke 1120, Pepsi 530, RC 370
Marketing : heavy promo spending
Coke Manager 1983
The loser collection
RC was bought by De pepper/7UP in 1990’s

Assumptions of perfect competition
1. All products are identical
No real or imagined products differences
Commodities – wheat, eggs, and pork bellies
Consumers choose the lowest price Make to product different – differation

2.
No patents
No proprietary designs or special skills
Equal access to production techniques
Equal access to raw materials on similar terms
3. No eatery or exit barriers
Easy entry (and exit)
Supply expands quickly to meet surges in demand
4. Atomistic competition

Types of competition
Perfect competition
The purest form
Makes many unreasonable assumptions
Monopolistic competition
Large number of sellers sell products that are “perceived” by customers to be different
Oligopoly
I don’t have the notes for this one

Consumer spending represent %70 of all the economic activity
Standard of living
A quantitative measure of a country’s wealth that shows how much they can buy and consume
Quality of life
A quantitative measures of well being that shows how happy and satisfied people are with their lives

Entrepreneur
A person who risks money to create a business
His or her Individual gain leads to public gain
Trickle down – create a new business
Adam Smith – “The invisible hand”
1976 the wealth of nations
Self directed gain results in economic benefits for all
Jobs, technological innoration
The importance of incentives

Capitalism
Means of production are privately owned
Operated for profit
Four basic right
1. Right for property
2. Right to keep profits
3. Right to complete
4. Risk/reward Capitalism Vs Socialism
Wealth creation Wealth distribution
Inequality Equality
Risk Security

Government can encourage entrepreneurship by:

Private ownership
Enforceable contracts
Tradable currency
Eliminate business and government corruption
Minimize taxes and regulation

Stakeholders a business must attend to:
Workers – Down
Community – Down
Customers – Up
Investors – Very Up!
Emphasis on investors has increased greatly in recent decades Economic Indicators
GDP
Unemployment rate
CPI
Productivity
Inflation/Deflation
Recession/Depression
Monetary/ Fiscal policy
Deficits/ National debt

Types of unemployment
Structural
When there is a mismatch between what jobs are available and what skills workers have
Steel workers versus programmers cyclical
Unemployment caused by fluctuations
Recession to boom times and back seasonal
Unemployment based on the time of the year resort towns

Lecture 3
Ethics
Whistleblower - People who report illegal or unethical behavior at their firm.
Classifying business decisions according to ethical and legal relationships
Are rebates handled ethical?
Companies offer consumers a discount, but give the discount to only a few costumers.