Questions and Answers
What is the concept that competition among firms represents, as described by Porter (1980)?
Competition is non-existent in a monopoly.
True
What is one of the tools or methodologies commonly used to measure concentration in a market?
Concentration ratios
The _______________ is calculated by squaring the market shares of each firm to assess competition.
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What are the three main types of economies identified in the content?
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In a command economy, the government regulates all economic activities and controls decision-making related to production.
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Define 'supply' in the context of economics.
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Price is determined by __________ and demand forces.
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Match the following concepts with their definitions:
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What is price elasticity of demand?
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How is price elasticity of demand calculated?
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In elastic demand, a change in price results in a proportionally greater change in the quantity demanded.
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In ________ demand, a change in price results in a proportionally equivalent change in demand.
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What influences wants, needs, utility, and value, including perceptions of technology products among different age groups?
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What is the primary difference between media products and life-sustaining products like shelter, food, and clothing?
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Media content is considered discretionary because it is essential for survival.
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Media companies focus on attracting consumers through a combination of marketing and branding efforts to influence their ______________ decisions.
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Match the media integration strategy with its description:
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Study Notes
Understanding the Media Economy
- The media economy is a complex system driven by the interaction of supply and demand forces.
- There are three main types of economies: command economy, market economy, and mixed economy.
Types of Economies
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Command Economy:
- Government regulates all aspects of economic activity.
- No open or free market.
- Examples: North Korea and Cuba.
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Market Economy:
- Complex system of buyers and sellers.
- Prices and quantities produced are determined openly and freely through competitive market forces.
- No country operates in a truly open market economy without government oversight or regulatory guidelines.
-
Mixed Economy:
- Combination of free market principles and government regulation and oversight.
- Examples: United States and the United Kingdom.
Supply and Demand
- Supply: Quantity of goods a producer will offer in a market using available resources.
- Demand: Quantity of goods buyers want to acquire in a market.
- Price: Cost of a good or service, determined by supply and demand forces.
- Long Tail Theory: Media content products with long-term incremental value, representing a demand curve that follows a long downward trajectory.
Price Elasticity of Demand
- Price Elasticity of Demand: Responsiveness to price changes.
- Elastic Demand: Proportionally greater change in quantity demanded in response to a change in price.
- Unit-Elastic Demand: Proportional change in quantity demanded in response to a change in price.
- Inelastic Demand: Less than proportional change in quantity demanded in response to a change in price.
Cross-Elasticity of Demand
- Cross-Elasticity of Demand: The concept that comparable products and goods can be substituted for one another.
- Examples: movie tickets, music streaming services, and over-the-top (OTT) streaming services.
Other Forms of Demand
- Actual Demand: The demand for media content or product at the individual level.
- Advertiser Demand: Advertisers purchasing time and space among media outlets to reach the audience.### Advertising and Media Economy
- Advertising represents the primary revenue form in most media economy sectors.
- Advertisers seek to maximize exposure to their messages when acquiring time and space in the media economy.
Media Properties and Mergers
- Media properties include radio and TV stations, newspapers, magazines, film studios, recording companies, internet service providers, and digital-based firms.
- Media mergers and acquisitions increased in the 1980s and 1990s due to low-interest rates, available capital, and high demand for businesses with strong profit margins.
Wants, Needs, Utility, and Value
- Wants are something we desire to enhance our lives, influenced by peers, family, institutions, culture, and advertising.
- Needs are basic necessities for survival, such as food, water, shelter, and clothing.
- Utility is the satisfaction derived from using media products and services.
- Value is the worth we place on a particular product or service, influenced by wants and needs, and is subjective in nature.
Pricing Media Products
- Media products have an economic cost, and the pricing of media products is a critical decision for media companies.
- Subscriptions are a popular way to access media products, with different packages or tiers and options for advertising or ad-free experiences.
- Legacy media has struggled to retain subscribers due to higher distribution costs, whereas digital media products have lower distribution costs.
Allocation
- Allocation decisions are made by suppliers, advertisers, and consumers in the media economy.
- Suppliers must determine how many units of a product to produce based on resources.
- Advertisers must decide what messages to place in what mediums, depending on strategic goals and budgets.
- Consumers make allocation decisions related to media products and services based on discretionary income and time.
Horizontal and Vertical Integration
- Horizontal integration involves entering different markets to create a competitive advantage.
- Vertical integration involves controlling all aspects of creation, production, distribution, and exhibition to leverage assets more efficiently.
- Examples of horizontal integration include Disney's expansion into theme parks, streaming, and film studios.
- Examples of vertical integration include Time Warner's merger with Turner Broadcasting System and Disney's acquisition of Pixar, Marvel Entertainment, and Lucasfilm.
Competition and Concentration
- Competition refers to the degree to which competitors compete for the same resources, such as audiences and advertisers.
- Concentration refers to a characteristic of a market's structure, exemplified by the theory of the firm.
- Measures of concentration include concentration ratios and Herfindahl-Hirschman index (HHI).
- Regulators are challenged by the digital transformation leading to the dissolving of market boundaries and the degree of activity across markets.
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Description
This quiz covers the basics of media economics, including types of economies and application of supply and demand concepts.
