Needs are the basic items required for human survival.
Human needs are an essential
concept underlying the marketing process because needs are translated into consumer
wants. Human needs are often described as a state of real or perceived deprivation. Basic
human needs take one of three forms: physical, social, and individual. Physical needs are
basic to survival and include food, clothing, warmth, and safety. Social needs revolve
around the desire for belonging and affection. Individual needs include longings for
knowledge and self-expression, through items such as clothing choices. Wants are needs
that are shaped by both cultural influences and individual preferences.
Wants are often described as goods, ideas, and services that fulfill the needs of an
individual consumer. The wants of individuals change as both society and technology
change. For example, when a computer is released, a consumer may want it simply
because it is a new and improved technology. Therefore, the purpose of marketing is to
convert these generic needs into wants for specific goods, ideas, or services.
Demand is created when wants are supported by an individual consumer's ability to
purchase the goods, ideas, or services in question.
Luxury is good or service which are demanded more than their need i.e. that is not
considered a necessity but is considered as something that brings pleasure or happiness
For example, an individual might purchase an expensive automobile because of the
status and comfort that it will bring, though a used car would suffice for traveling
purposes.
Economy:
Activities related to the production and distribution of goods and services in a particular
geographic region
Economics
Economics is the study of how goods and services are produced, distributed and
consumed in a society.
Microeconomics
Microeconomics seeks to understand how individuals and companies make decisions
about how to allocate scarce resources.
Examples of Microeconomic Issues
Microeconomics focuses on problems relating to supply and demand, elasticity,
consumer preferences, markets and monopolies
Macroeconomics
Macroeconomics seeks to understand economics on a large scale, often from the point
of view of government policy.
Examples of Macroeconomic Issues
Issues studied by macroeconomics include national output, unemployment, interest
rates and inflation
Economic system
An economic system is a mechanism which deals with the production, distribution
and consumption of goods and services in a particular society. The economic system is
composed of people, institutions and their relationships. It addresses the problems
of economics like the allocation and scarcity of the resources
Capitalist Economy
A capitalist economy is an economic system in which the production and distribution of
commodities take place through the mechanism of free markets. Hence it is also called as
market economy or free trade economy. Each individual be it a producer, consumer or
resource owner has considerable economic freedom. An individual has the freedom to
buy and sell any number of goods and services and to choose any occupation. Thus a
market economy has no central coordinator guiding its operation. But self-organization
emerges amidst the functioning of market forces namely supply, demand and price.
Problem of Capitalist Economy
Inequalities OR Class system:
It creates extreme inequalities in income and wealth. The producers, landlords, traders
reap huge profits and accumulate wealth. Thus the rich become richer and the poor
become poorer. The poor with limited means are unable to compete with the rich. Thus
capitalism widens the gap between the rich and the poor creating inequality.
The essential features of Capitalism
Right to Private Property: Individuals have the right to buy and own property means
everyone has right to acquire the private property, to keep it and after his death, to pass
it on to his heirs the results of this system is that inequalities of wealth
Freedom of Enterprise: It ensures that entrepreneurs and private businesses are free to
obtain and use economic resources to producer their choices of goods and services and
to sell them in their chosen markets
Freedom of Choices: Freedom of choice means that in a world of scarce resources the
individual is free to make his own economic decisions. Consumers, workers, savers,
producers, etc., all are free to make the economic choices that will impact their lives
Profit-Motive: Profit is the only motive for the functioning of capitalism. Production
decisions involving high risks are taken by individual only to earn large profits. Hence,
profit-motive is the basic force that drives the capitalist economy.
Role of Entrepreneur: Entrepreneur plays important role under this system, the entire
productive machinery is under his direction, it is he who hires the others factors of
production and undertakes to pay them .Without entrepreneur system cannot work at all
Competition: Competition or economic rivalry in the marketplace is the means by which
the excesses of individual self interest are controlled. To perform this very important
function in a capitalist system, certain assumptions or conditions are necessary. One
condition is that large numbers of buyers and sellers must be present in the market place
for competition to exist. The numbers must be so large that no one buyer or seller can
control the demand or supply of the good or service, therefore, the price. Another
condition or assumption of competition is freedom of entry or exit from the marketplace.
If one business exists and commands a high price for the products it sells, other
producers must be able to move into the market and compete; therefore, there should be
no artificial or real barriers to entry or exit from the marketplace.
Socialist Economy
In a socialist economy, the means of production are owned and operated by the State. All
decisions regarding production and distribution are taken by the central planning
authority. Hence the socialist economy is also called as planned economy or command
economy. The government plays an active role. Social welfare is given importance; hence
equal opportunity is given to all. All such advantages have delivered high level of human
development. Some of the most successful socialist economies are China, Cuba, Vietnam
and North Korea
What are the Merits of socialism?
Socialism tries to make each man equal by equalizing the rich and the poor, so as to
provide everyone with enough to survive. Socialism works to evict poverty but often
becomes 'active poverty' - one of the world's biggest problems.
Socialism provides all citizens with their survival needs, creating a stable social
environment. Members that cannot participate economically - due to mental disabilities,
age, or poor health - are still cared for.
What are the demerits if socialism?
Mixed Economy
In a mixed economy, both public and private institutions exercise economic control. The
public sector functions as a socialistic economy and the private sector as a free
enterprise economy. All decisions regarding what, how and for whom to produce are
taken by the State. The private sector produces and distributes goods and services. It
manufactures consumer and capital goods in the interest of public welfare. A mixed
economy possesses the freedom to hold private property, to earn profit, to consume,
produce and distribute and to have any occupation. But if these freedoms affect public
welfare adversely, they are regulated and controlled by the State.
