Chapter 3 AgEcon
Overcomes form, time and space separation
Financing Function
Provides funds to pay for production, storage, and transportation before payment form sale.
Financing Function
Utility created by the processing function, a form more desirable for consumers
Form Utility
Overcomes information separation
Grades & Standards Function Market Information Function
Describes products so that buyers and sellers do not have to physically inspect quality of each shipment before they purchase it.
Grading and standards function
Consumer's happiness is limited by their ______. How do they deal with this?
Income By buying small quantities of lots of items.
Lack of relevant information
Information separation
Disseminating market info on prices, quantities, qualities, etc., that can influence buying and selling functions
Market Information Function
The set of economic and behavioral activities that are involved in coordinating the various stages of economic activity from production to consumption.
Marketing
Government directives imposed on the processors of perishable commodities that require the processor to behave in the best interest of the producer rather than the self-interest of the processor.
Marketing orders
Enforcement of meat products processing
Meat Inspection Act of 1906
Inability to transfer ownership
Ownership separation
What are the 5 barriers to consumer satisfaction?
Ownership, Time, Value, Space, Information Separations
Maintains products in good condition between production and sale times
Storage Function
Conduct is determined by _______.
Structure
Number of competing firms, homogeneity of products, & costs of entry and exit
Structure
The number of firms in an industry and the relationship among them
Structure
This model is used by the The Federal Trade Commission and the U.S. Department of Justice to monitor the efficiency and fairness of our economic system
Structure-Conduct-Performance Model
This model show how a firm is organized in a market, how they make decisions which in turn influences the level of efficiency and fairness present in the market
Structure-Conduct-Performance Model
Producers use the most efficient _______ available and cheapest combination of _____ to make their products
Technology Input
T/F In recent years, several marketing orders have been eliminated
True
Overcomes space separation
Transportation Function
Location of product is not accessible
Space separation
What are the economic states of activity in a marketing system?
-Consumption -Retailing -Wholesaling -Processing -Assembly -Production
What are the 4 utilities of Marketing?
-Form Utility -Place Utility -Time Utility -Possession Utility
What are the 5 key question to marketing?
-What products to produce? -How much to produce? -When should production be initiated? -Who should do the producing? -For whom the goods should be produced?
Moves products from production centers to where the consumer is willing to purchase it
Transportation Function
How did the marketing system evolve?
Advantages of Specialization & Trade--> Use of Central Market--> Use of Money--> Use of Middlemen
Laws prohibiting business behavior that threatens competition such as price-fixing, collusion, and anticompetitive mergers.
Antitrust laws
What does the phrase "bridge the gap" mean?
Bridge the gap between the conflicting needs of producers and consumers by completing the production process.
To overcome ownership separation barrier
Buying Function & Selling Function
What are the 9 marketing functions to overcome the 5 barriers to consumer satisfaction?
Buying, Selling, Storage, Transportation, Processing, Grades & Standards, Financing, Risk-Taking, and Market Information functions
Agricultural cooperatives could form by farmers and be exempt from antitrust laws
Capper-Volstead Act of 1922
Prohibited Acts that lessened competition and tried to create monopolies
Clayton Act
In a market with many firms, ______ that enhance an individual's firm's ability to maximize its long term profits can be beneficial to consumers.
Conduct
Strategies firms pursue to gain competitive advantage
Conduct
With only a few firms this type of behavior could lead non-beneficial monopolistic behavior
Conduct
______ reminds us that the way to generate more total goods is for those who are most efficient at the production of each good or service to specialize in it's production
Economics
Structure and conduct affect economic ________, consequently if the markets meet the aforementioned criteria for structure and conduct the market should perform in a fair and efficient manner
Performance
Competitive disadvantage, competitive parity, temporary or sustained competitive advantage
Performance: Firm Level
Productive and allocative efficiency, level of employment, progress
Performance: Society Level
Utility created by the transportation function, because producers need to make the product available to consumers where they need it.
Place Utility
Utility created by the exchange function to make ownership easy, cash, credit cards, easy credit terms
Possession Utility
Overcomes value separation
Processing Function
Transforms products to forms that have greater value to consumers
Processing Function
When marketers buy large amounts of a few things that consumers want & then allow consumers to buy small quantities of a large assortment of items.
Producers' Production Process
It is the ______ motive that drives the marketing system
Profit
Assuming the risk of loss before consumption
Risk-taking Function (physical or price risk)
Overcomes time separation
Risk-taking Function Storage Function
Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is declared to be illegal
Sherman Act
Food grading by USDA's AMS division
The Food Products Act of 1917
Fair trade in these markets
The Packers and Stockyards Act of 1921 & The Perishable Commodities Act of 1930
Utility that can be created by storage function, because of our year round desire for goods and services
Time Utility
Product not available when its desired
Time separation
What is the mission of marketing?
To resolve the conflicting goals of consumers and producers
What is the net effect of market orders?
To ultimately result in higher prices to consumers and higher returns for producers than would exist in a competitive realm.
Marketing is all about creating or producing _______, because they hope that their customers pay more for the utility than it cost them to produce that utility.
Utility
Product is not in the proper form
Value separation
When do producers maximize their happiness? How do they do this?
When they maximize their long run profits By producing large quantities of just a few things.