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.