Marketing Essentials

Chapter 3: Political and Economic Analysis

Chapter Summaries

Section 3.1

  • An economy is how a nation chooses to use its resources to produce and distribute goods and services to provide for the needs and wants of its people.
  • The four factors of production are land, labor, capital, and entrepreneurship.
  • Scarcity is the difference between wants and needs and available resources.
  • There are three fundamental economic questions: what will be produced, how it will be produced, and who should get what is produced. Traditional economies rely on tradition to answer the questions. Market economies rely on the market to decide. In command economies, the government answers the three questions. In mixed economies, multiple factors influence the decisions.
  • The economic/political philosophies of capitalism, socialism, and communism tend to encourage different types of economic systems.

Section 3.2

  • The characteristics of a healthy economy are high productivity, stable prices, and low unemployment.
  • Economic indicators such as productivity, gross domestic product (GDP), standard of living, consumer price index (CPI), consumer confidence, and unemployment rates can measure an economy.
  • The key phases of the business cycle are expansion, peak, recession, trough, and recovery. The business cycle affects businesses, consumers, and governments, and they in turn affect business cycles, both domestically and globally.

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