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.