L2 Agribusiness Module 2 Importance of Marketing hlayiso.com

NATIONAL CERTIFICATE (VOCATIONAL) PRIMARY AGRICULTURE SUBJECT: AGRIBUSINESS LEVEL: 2 LECTURER: MBHELE M.L MODULE 2 IMPORTANCE OF MARKETING Downloaded from hlayiso.com

INTRODUCTION Market equilibrium is one of the most important concepts in the study of economics. In this lesson, you'll learn what market equilibrium is and how it is established, and you'll also be provided some examples. A short quiz follows this lesson. Downloaded from hlayiso.com

MARKET EQUILIBRIUM Market equilibrium is a market state where the supply in the market is equal to the demand in the market. The equilibrium price is the price of a good or service when the supply of it is equal to the demand for it in the market. If a market is at equilibrium, the price will not change unless an external factor changes the supply or demand, which results in a disruption of the equilibrium. Downloaded from hlayiso.com

MARKET EQUILIBRUIM GRAPH Downloaded from hlayiso.com

SUPPLY, DEMAND & EQUILIBRIUM If a market is not at equilibrium, market forces tend to move it to equilibrium. Let's break this concept down. If the market price is above the equilibrium value, there is an excess supply in the market (a surplus), which means there is more supply than demand. In this situation, sellers will tend to reduce the price of their good or service to clear their inventories. They probably will also slow down their production or stop ordering new inventory. Downloaded from hlayiso.com

SUPPLY, DEMAND & EQUILIBRIUM The lower price entices more people to buy, which will reduce the supply further. This process will result in demand increasing and supply decreasing until the market price equals the equilibrium price. If the market price is below the equilibrium value, then there is excess in demand (supply shortage). In this case, buyers will bid up the price of the good or service in order to obtain the good or service in short supply. Downloaded from hlayiso.com

SUPPLY, DEMAND & EQUILIBRIUM As the price goes up, some buyers will quit trying because they don't want to, or can't, pay the higher price. Additionally, sellers, more than happy to see the demand, will start to supply more of it. Eventually, the upward pressure on price and supply will stabilize at market equilibrium. Downloaded from hlayiso.com

PRICING OF GOODS Price may be defined as the exchange of goods or services in terms of money. Without price there is no marketing in the society. If money is not there, exchange of goods can be undertaken, but without price; i.e., there is no exchange value of a product or service agreed upon in a market transaction. Price is the key factor which affects the sales operations. Downloaded from hlayiso.com

IMPORTANCE OF PRICING OF GOODS The market price of a product influences wages, rent, interest and profits. In other words, the price .of a product influences the price paid for the factors of production-labour, land, capital and entrepreneurship. The price is a matter of vital importance to the buyer and the seller. Exchange of the goods or services takes place only when the prices are agreed upon by the seller and the buyer. Downloaded from hlayiso.com

IMPORTANCE OF PRICING OF GOODS Price can decide the success or failure of a firm. Prices are important economic regulators. By transferring to money economy from barter economy, the importance of price has been increased. Price is a primary source of revenue which, all firms try to maximize by expanding markets. Downloaded from hlayiso.com

IMPORTANCE OF PRICING OF GOODS The marketing demand for a product or service to a large extent depends upon the price of the product. Price will affect the competitive position and share of the markets. Pricing policy, no doubt is a potential weapon, specially in a planned economy like ours where it can be used in such a way as to bring about a proper allocation of resources according to planned priorities. Downloaded from hlayiso.com

IMPORTANCE OF PRICING OF GOODS When a firm sets a price for its goods, it has to consider many factors-demand, existing competition, legal restrictions. Only the cost of production is not enough to fix the price, but the objectives of the firm may also be considered. In consumer-oriented marketing, the product must have utility to the buyer, who must have satisfaction. If a consumer is not satisfied, he may refuse to buy the product. Downloaded from hlayiso.com

ASSESSMENT ACTIVITY 1. WHAT IS DEMAND? 2. WHAT IS THE LAW OF DEMAND? 3. WHAT IS SUPPLY? 4. WHAT IS THE LAW OF SUPPLY? 5. WHY IS PRICING OF GGOODS IMPORTANT? Downloaded from hlayiso.com