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Comparative Advantage and Marketing Equilibrium

1. Your roommate is a better cook than you are, but you can clean more quickly than your roommate can. If your roommate did all the cooking and you did all the cleaning, would your chores take you more or less time than if you divided each task evenly? Give similar example of how specialization and trade can make two countries both better off.
2. Define the equilibrium of a market. Describe the forces that move a market toward its equilibrium.
3. Explain what is meant by market-oriented mission statement and discuss the characteristics of effective mission statements.
4. Explain the stages of the consumer buyer decision process and describe how you or your family went through this process to make a recent purchase.
5. Define positioning and explain how it is accomplished. Describe the positioning for the following brands:, and Coca-Cola.

Reference books:
1. Principles of Economics by N. Gregory Mankiw
2. Principles of Marketing by Kotler & Armstrong

Solution Preview

1. Dividing task evenly would take more time, though the total effort of doing task would get reduced.
Suppose Japan can produce 10 cars or with the same effort and labor it can produce 1 quintal of barley. China can produce 1 quintal of barley or 1 car. Hence, Japan has comparative advantage in producing cars and China has it in producing barley. If there are two workers for these tasks, Japanese worker would specialize in producing 20 cars and Chinese worker would specialize in producing 2 quintal of barley. If China trades 1 quintal of barley for 5 cars, it would have 5 cars and 1 quintal of barley. Japan, after the trade would have 15 cars and 1 quintal of barley. In this way, both China and Japan get benefited from the trade.

2. Equilibrium price balances two forces of demand and supply and any change in price would push the equilibrium to a new position. Increase in demand and decrease in supply are other forces which change the equilibrium position. In dynamic changing market, shifting curves represent change in income, technical conditions, tastes of people, weather conditions, all of which are forces which move a market towards its equilibrium.

3. Market oriented mission statement focuses on satisfying customer needs rather than focusing on product. This ...

Solution Summary

The expert examines the comparative advantage and marketing equilibrium. The stages of the consumer buyer decision process are provided.