Case Marketing

In economics, the laws of supply and

demand operate together to determine the price at which products will be sold in a

market. A market consists of all the buyers and sellers for a particular product. Figure

1.3c shows that competition among buyers to buy a particular product, and competition

among sellers to provide the product, leads the demand and supply curves

to cross or intersect at the point where Quantity Q 1 is being bought and sold at a

price of P1. At this point, bargaining between buyers and sellers in a particular market

has established the "going," or market price. As much of the good is being supplied

as people want to buy, so the price is neither increasing nor decreasing.

It is important to realize that the price of all products are determined at the

margin--the point at which the supply of the product just meets demand for it. At the

margin, people have to assess carefully what value or worth a particular good or service

has for them. The margin is like the center rod on a teeter-totter or a knife-edge,

where people go one way or the other--buy or not buy, or sell or not sell. The price of

a company's stock is determined like any other product. This is why the value of a

company's stock, like Kroger's, rises and falls, often quickly. Investors buy, hold, or

sell a company's stock based upon their subjective perceptions of how competitive

they think its goods and services are. If they believe customers will be attracted to a

company's products and the company's profits will increase, investors will bid up the

price of the stock. If, for example, investors think Wendy's hamburgers are going to

become increasingly popular, the demand for and price of Wendy's stock will

increase. If investors think customers are switching to a competitor's products such as

Subway's sandwiches and McDonald's chicken salads and that Wendy's profits will

suffer as a result, they will sell Wendy's stock, and its price will decline.

...