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Explain each of the following statements using

Principles of Microeconomics | 7th Edition | ISBN: 9781285165905 | Authors: N Gregory Mankiw ISBN: 9781285165905 94

Solution for problem 1 Chapter 4

Principles of Microeconomics | 7th Edition

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Principles of Microeconomics | 7th Edition | ISBN: 9781285165905 | Authors: N Gregory Mankiw

Principles of Microeconomics | 7th Edition

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Problem 1

Explain each of the following statements using sup-ply-and-demand diagrams. a. When a cold snap hits Florida, the price of orange juice rises in supermarkets throughout the country. b.When the weather turns warm in New England every summer, the price of hotel rooms in Caribbean resorts plummets. c.When a war breaks out in the Middle East, the price of gasoline rises and the price of a used Cadillac falls."

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MGM – Lectures 16 (15 cont.) & 17  Brand Product Life Cycle is under control of market (based on interest), while Product Form PLC is technology-driven (advertisements)  Extending Product Life Cycles: o Market Penetration – Sell more of the same product to the same market/people to increase sales. The trouble is when deciding which market segment that is possible in. (For BDI & CDI Examples look at PPT Slides)  Brand Development Index (BDI) = J (Brand Sales ($) per Capita in Territory J ÷ Brand Sales ($) per Capita Nationally) X 100  Category Development Index (CDI) = J (Category Sales ($) per Capita in Territory J ÷ Category Sales ($) per Capita Nationally) X 100 o Market Development – develop a new market for an already existing product o Product Modification – Change/adjust the product, but keep it in the same market o Product Repositioning – Change the way people think about the product (arm & hammer)  Basic Branding Terminology: o Brand Name – What the products are sold under (E.g. – Nike) o Brand Mark – symbol of brand (E.g. – Nike Swoosh) o Trade Character – bringing life & personality to the brand (E.g. – Tony the Tiger/Captain Crunch) o Trademark – Legal protection of the previously mentioned (E.g. – ©, ®, ℗, ℠, or ™)  Good Brand Name Qualities: o Easily Pronounceable o Easy recall/recognition o Conveys product class o Conveys brand benefit o No negative connotation o Translates well in many languages  Family Branding v. Multiple Branding: (General Mills does hybrid) o Family – name is on every product, all product recognized by brand name (E.g. – Nike) o Multiple – compete in multiple product categories (E.g. – P&G)  National Brands v. Private Label Brands: o Private Label – product is owned by retailer, and controlled every step of the way by them (owned by retailer, not manufacturer) o National – owned by company that produces them, but sold by different retailer  Licensing: o Company with a well-established reputation has to trademark their brand(s) in order to legally protect them  Licensor – the reputable company with the trademark  Risk: make sure the brand image/emblem/name is used on high quality merchandise  Licensee – purchased the right to use the trademark; the licensor just makes a percentage back  Brand Equity: “added value a given brand names provides a product.” o BE ($) = Total Value of the firm – value of the firm’s tangible assets o A.K.A.  how much of the value of the company is coming from the brand  Components of Brand Equity: o Awareness – people need to know about the brand; recall/recognize it easily o Associations – people need to think positively about the brand o Perceived Quality – what quality you see the brand as (high/low) o Loyalty – customers who buy frequently & don’t really consider other brands  Extension of Brand Equity: o Line Extension – new product within a current line of product; new version (same name & recognition) o Category Extension – Same brand name, new product category – easy to do if categories are relatable  Packaging Functions: o Contain/Protect the product o Facilitate the use of, or show/demonstrate, how to use the product o Communicate what can be done with the product o Fit Channel Needs – meet needs for convenience of retailers  E.g. – box toothpaste so it can be easily stacked o Innovation – new products, flavors, features, etc.  Emerging Issues: what can arise o Consumer Brand Relationships – the relationship between brand & customer (may change from entering new market, changing product, etc.) o Brand Communities – conversations between the brand and customers (customer service) or people talking to others regarding the products

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Chapter 4, Problem 1 is Solved
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Textbook: Principles of Microeconomics
Edition: 7
Author: N Gregory Mankiw
ISBN: 9781285165905

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