Transcript MM--Ch. 3 PPT

Chapter 3
Income and Purchasing Power
Copyright 2007 Thomson South-Western
Inflation
• Is an increase in the general level of
prices for goods and services
• Is measured by the U.S. government
using the Consumer Price Index (CPI)
• Has several variations
– Disinflation
– Reflation
– Hyperinflation
3-1 Inflation and Prices
Slide 2
Deflation
• Is a decrease in the general level of
prices for goods and services
• Is the opposite of inflation
• Happens when
– Events cause consumers to buy less
– Producers are able and willing to provide
goods at lower prices
3-1 Inflation and Prices
Slide 3
Causes of Inflation
• Demand-pull inflation
• Cost-push inflation
• Real-cost inflation
Demand-pull inflation occurs
when consumers want to buy
more goods than producers
supply.
3-1 Inflation and Prices
Slide 4
Inflation and Employment
• High inflation often means high
employment rates
• Low inflation often means low
employment rates
• Mild inflation of 2 or 3 percent can be
good for the economy
3-1 Inflation and Prices
Slide 5
In Times of Inflation
• Workers with fixed pay rates may be able to
buy less
• Consumers must spend more to meet needs
and may be able to save or invest less
• A dollar received in the future is worth less
than a dollar received today (time value of
money)
3-1 Inflation and Prices
Slide 6
Ethics
A Full Day’s Work for a Full Day’s Pay
• Ethical behavior requires workers to
provide a full day’s work for a full day’s pay
• This behavior can lead to positive job
ratings or promotions
• Poor work habits can lead to poor job
ratings or dismissal
3-1 Inflation and Prices
Slide 7
Focus on...
The Fed
• The Federal Reserve System uses tools
to manage the effects of rising prices
• Monetary policy
– Discount rate
– Federal funds rate
– Prime rate
• Fiscal policy
Source: The Federal Reserve Board, Monetary Policy,
http://www.federalreserve.gov/policy.htm (accessed October
17, 2006).
3-1 Inflation and Prices
Slide 8
Setting Prices
• Prices are affected by
– Producers
– Consumers
– Market forces
• Sellers want to set a price
– That will support the greatest demand
– That will be profitable
3-2 Price and Demand
Slide 9
Cost-Plus Pricing
• Price is set by considering
– The total cost of making and delivering the
product
Cost-Plus Pricing for a Chair
– A markup amount
Wood
$23.76
(also call profit
Labor
20.00
margin)
Paint and supplies
1.24
Indirect costs
Total cost
Markup (40%)
Price
3-2 Price and Demand
12.00
57.00
22.80
$79.80
Slide 10
Value-Based Pricing
• Price is set by considering how much
consumers will be willing to pay
• Companies often do
market research to help
in setting prices
A mall offers many stores at which
to stop for the best prices.
3-2 Price and Demand
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Market-Based Pricing
• Price is set to be competitive with prices of
similar products
• Companies may set a higher price for
products with new features
• Unique products that cannot be bought
elsewhere may command higher prices
3-2 Price and Demand
Slide 12
Buying Strategies Affect Demand
• Economizing
– Saving as much as possible
– Spending money only when necessary
• Optimizing
– Getting the highest value
for the money spent
Taking advantage of sale prices
is an example of optimizing.
3-2 Price and Demand
Slide 13
Technology Corner
Buying Online
•
•
•
•
Many retail Web sites are available
Full descriptions of products are provided
Shoppers can set up accounts
Payments are made with debit or credit cards
or other electronic means
3-2 Price and Demand
Slide 14
Success Skills
Time Management
• Using time management strategies can help
you be more productive
• Scheduling time to plan
purchases can help you make
better buying decisions
This shopper is economizing
and following a shopping list.
3-2 Price and Demand
Slide 15
Selling Goods and Services
• Sellers use various strategies
–
–
–
–
Convenience
Customer service
Meeting needs and wants
Creating demand
through advertising
PR Newswire HOLTON, TEITELMAN AND GURY ADVERTISING
3-3 Selling and Buying Strategies
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Buying Strategies
• Before you shop
– Prepare a list of needed items
– Decide how much to spend
• While you shop
– Compare prices
– Do not make last-minute purchase decisions
• After you buy
– Keep receipts and warranties
– Inspect the product and evaluate the purchase
3-3 Selling and Buying Strategies
Slide 17
Building Communications Skills
Creative Listening
• Is a skill used to solve problems
• Involves the listener evaluating what has
been heard and making a decision
• Involves logic as well as listening
3-3 Selling and Buying Strategies
Slide 18