History

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Table of Contents

• Paul
• History of Jif
• Labor, Capital, and Human Capital
• Opportunity Cost and the Production Possibilities
  Frontier
• Christina
• Supply and Demand
• Elasticity
• Jayia
• Consumer Choice
• Production and Cost

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Table of Contents Continued

• Nikki
• Perfect Competition
• Monopoly
• Katie
• Oligopolies
• Labor Market
• Conclusion

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History

• Smuckers was started in 1897 by Jerome Monroe
  Smucker
• Jerome Monroe Smucker used the fruit of John
  Chapman A.K.A. Johnny Appleseed to produce the
  first goods such as cider and apple butter.
• 100 years later Smuckers can be found in homes
  across the country ranging from products such as
  jelly and jams or peanut butter and crisco oil.

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History cont

• Today Smuckers holds leading food positions in
  seven U.S. food categories.
• The Smuckers company has also received awards for
  being one of the best companies to work at for
  four years in a row.

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Jif is now a product of the J.M. Smucker Company

• On June 1, 2002 The merger of the Jif peanut
  butter and Crisco shortening and oils businesses
  into Smucker was completed.
• Jif had originally been owned by Proctor
  Gamble, who first introduced the peanut butter in
  1958.

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Labor

• Labor- is the time human beings spend producing
  goods and services.
• Time to build a new plant.
• Time to grow fruits and make the products
  available for sale.

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Capital

• Long-lasting tools used in producing goods and
  services.
• Physical capital includes buildings, machinery
  and equipment.

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Human capital

• The skills and training of the labor force.
• The ability to produce Smuckers products.

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Oppurtunity Cost

• The next best alternative option given up in
  order to produce a given product.
• We can get a better look at the opportunity cost
  by looking at the production possibilities
  frontier.

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Production Possibilities Frontier

• It is the different combinations of goods that
  can be produced with the resources and technology
  currently available
• More importantly, the PPF tells us the maximum
  number of peanut butter we can produce for each
  unit of jelly produced and vice versa. Demand
  also helps determine where to produce along the
  PPF.

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What is demand?

• Demand is the different amounts of Jif peanut
  butter which buyers are willing and able to
  purchase at different prices at a given period of
  time

Price
Quantity
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Ceteris ParibusFactors of Demand

• Income
• Price of related goods
• Taste
• Number of consumers in the market
• Expectations of consumers
  
• (Especially with respect to prices, income,
  and availability)

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Income of Consumers

• As income decreases, Demand of inferior
  goods increases
• As income increases, demand of normal goods
  decreases
• Jif peanut butter is an inferior good

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Prices of Related Goods

• Substitutes
• -goods that can be used in place of some
  other good, fulfils more or less the same purpose
• Examples Peter Pan and Skippy Peanut Butter

• Complements
• -goods that are used with some other goods
• Examples Jelly and bread
• 46 consumption

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Taste

• The consumer feeling about the product
• and the costs of related goods and services
• When people favor Smuckers demand increases
  and the demand curve shifts to the right
• -Despite its American popularity and longevity,
  peanut butter remains primarily a North American
  phenomenon. In many parts of the world, peanut
  butter is regarded as unpalatable American
  curiosity, despite the presense and worldwide
  popularity of peanuts for six centuries.

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Taste continued.

• Tastes for Jif Peanut butter are effected by
  health, weight, and personal taste
• Jif has adjusted to peoples tastes by more flavor
  by introducing reduced fat products. Also by
  adding more flavors
• Example Jifs Smooth Sensations Peanut butter
  which includes Apple Cinnamon, Chocolate silk,
  and Berry Blend

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Number of consumers in the market

• The population of people living in a certain area
• - as a population decrease, the demand for the
  good will increase

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Expectations of Consumers

• Expectations of future events
• If buyers expect the price to rise, they will buy
  more of the good now
• If buyers expect the price to fall, they will
  wait and take advantage of the lower price

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Elasticity

• Is the measure of responsiveness
• Elasticity percent change in quantity
  demanded over the change in price

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Determinants of elasticity continued

• Availability of substitutes
• - more substitutes, the more elastic
• - fewer substitutes, the less elastic

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Determinants of Elasticity continued

• Importance in the buyers budget
• - The money you spend on an item the more
  elastic the demand
• Smuckers Peanut butter is an inelastic good
  because it does not consume a large amount of the
  profit

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Budget Constraint

• A consumers budget constraint identifies which
  combinations of goods and services the consumer
  can afford with a limited budget, at given prices.

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Food vs. Gas (for car)
Food
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• Food 2/bottle
• 1 sandwich-2
• 2 sanwiches-4
• 3 sandwiches-6
• 4 sandwiches-8
• 5 sandwiches-10

Change in Income
Gas
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Food

• Gas 2/gallon
• 1 gallon-2
• 2 gallons-4
• 3 gallons-6
• 4 gallons-8
• 5 gallons-10

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Change in Price
Gas
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Economies of Scale
Economies of Scale (as listed) lower average
total cost as quantity increases

• Specialization and division of labor
• Quantity discounts
• Better use of by-products
• Capital goods and technology bias
• Co-location of suppliers

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Utility

• A measure of satisfaction
• Marginal Utility Change in Total Utility/Change
  in Quantity
• Law of Diminishing Marginal Utility
• As taste remains the same, consumption of peanut
  butter and jelly sandwiches may first result in
  increasing marginal utility, but eventually the
  consumer will reach a point where further
  consumption results in less and less satisfaction

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Utility (continued..)

• Average Utility equals Total Utility/Quantity

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Utility (continued)
Utility
Marginal Utility
Total Utility
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Average Utility
1
Quantity
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What is the structure of the market in which
Smuckers sells Jif peanut butter?
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• By market structure, we mean all the
  characteristics of a market that influence the
  behavior of buyers and sellers when they come
  together to trade.

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To determine the structure of the peanut butter
market we must start by asking three basic
questions.

• How many buyers and sellers are there in the
  market?
• Is each seller offering a standardized product?
• Are there any barriers to entry or exit?

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Answering these questions will help us to
classify the peanut butter market into one of 4
basic types

• Perfect competition
• Monopoly
• Monopolistic competition
• Oligopoly

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A perfectly competitive market has three
important characteristics

• A large number of buyers and sellers, and each
  buys or sells only a tiny fraction of the total
  quantity in the market
• Sellers offer a standardized product
• Sellers can easily enter into or exit from the
  market

Price
DP
Quantity
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Is Smuckers a perfect competitor in the peanut
butter market?

• Sellers can easily enter into or exit from the
  market
• Sellers do offer a fairly standardized product,
  though some consumers may favor the taste of one
  peanut butter over another
• Smuckers cannot be a perfect competitor though
  because, even though there are a large number of
  buyers and sellers in the peanut butter market,
  some sellers sell more than a tiny fraction of
  the total quantity in the market

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A Monopoly firm is the only seller of a good or
service with no close substitutes.
Price
Demand
Quantity
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Smuckers is not a monopoly in the peanut butter
market because there are many other firms which
sell peanut butter
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Monopolistic competition combines some features
of both pure competition and monopoly. It has
three main characteristics

• Many buyers and sellers
• Relatively easy entrance/exit
• Differentiated products

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• Smuckers is very similar to a monopolistic
  competitor, but there is another kind of market
  structure which better describes the peanut
  butter market.

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Oligopoly

• An oligopoly is a market structure in which a few
  firms produce a large percentage of total
  industry output
• Firms must consider what other firms are doing
  before they make a decision

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Characteristics of Oligopolies

• Economics of Scale
• Barriers to Entry
• Reputation
• Strategic
• Government created barriers

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• In the market for peanut butter, Smuckers is
  characterized as one of the firms that makes up
  an oligopoly
• The oligopoly consists of firms such as Peter
  Pan, Skippy, and Jif. These three companies make
  up 60 of peanut butter sales.

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Advertising

• Advertising can be done in a number of
  different ways such as
• Commercials
• Magazines
• Billboards
• Internet

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Smuckers Advertising
Share a smile with Smuckers.and have a berry
good time!
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The Labor Market

• The demand for labor by a firm is a derived
  demandderived from the demand for the product
  the firms produces
• If labor is the only variable input, the firm
  hires up to the point at which the marginal
  revenue product of labor equals the wage rate
• Grocery stores, specialty retailers, restaurants,
  hotels, and other food product manufacturers
  comprise Smuckers worldwide customer base

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The Labor Market

• Smuckers has over 2,000 employees worldwide
• They have 12 manufacturing plants
• They have 4 fruit processing facilities
• They distribute products in more than 70 countries

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Changes to Labor Market Equilibrium

• Increase in market labor supply would decrease
  the wage rate while increasing the level of
  employment
• - Increase in supply results from a reduction in
  the cost of acquiring skills needed for the labor
  market, an increase in the population, or a
  change in tastes in favor of work in that market

• Increase in labor demand will shift the demand
  curve rightward, increasing both the wage rate
  and the level of employment
• Increase in labor demand results from an increase
  in the price of the firms output, technological
  change that increases the market product of
  labor, introduction of a new input that is
  complementary with labor, or and increase in the
  number of firms hiring in that market

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Conclusion
In conclusion, we have learned that Jif peanut
butter is an inferior good, price elastic, and is
sold in an oligopoly. The consumer demand
determines a lot of these factors. Smuckers new
ownership of Jif has further enhanced its
leadership position in the market.
Any Questions?
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