Chapter 1 - Consumers

1. Chapter 1 - Consumers THE ENGINE THAT RUNS THE ECONOMY

2. Decision Making Project Get out of town You and three friends have saved up $800 each to take a trip during your spring break. You want to stay a week. Keep in mind that you have to stay within you budget.

3. What are the pros and cons of a well-planned vacation versus an unplanned vacation?

4. Decisions, Decisions • “Customer is always right” • Personal Values- • Values – are your principles-the standards by which you live. • You decide what is right or wrong. • Life values are the principals that are most important to you in life. • Social values change

5. Decisions, Decisions Cont. • Goals • The things you want to accomplish in life • Needs- • Are the things you can’t live with (Food, water, clothing) • Wants- • Are the things that you would like the have but can live without

6. Your Life Span Birth Death Infancy Retired Young Adult Elderly Childhood Mature Adult School Job Career Travel Advanced Education Community Service Raise Children Care for Parents Medical Care Home Ownership

7. Decisions, Decisions cont. • Opportunity cost • Is the value of your next best alternative whenever you make a choice. • Ask yourself is the reward worth the cost.

8. Make Decisions • A rational buying decision • Is a choice made in an organized, logical manner. • Decision Making Process • Specify • Search • Sift • Select • Study

9. Specify • Identify the need or want that you are trying to fulfill. Determine your goals. • You will use Need or Wants, Goals, and Values in specifying all decisions.

10. Specify (cont.) Goals • You want to go on vacation. • You want to spend less than $3200. • You want ……

11. Search • Plan your search • Impulse Purchases – • A Purchase made on a whim, without using a decision making process.

12. Decision Making Project Get out of town You and three friends have saved up $3200 to take a trip during your spring break. You want to stay a week. Keep in mind that you have to stay within you budget. Where can we search for info?

13. Sift • Look at your options • Look at Your Opportunity Cost

14. Where are you going on vacation?

15. Understand Economic Systems • An economic system is the way a nation uses resources to produce goods and services. • Production- • Is the creation of goods and services • Resources- • Include raw materials, labor, knowledge, and equipment • Economics is the study of how economic systems work.

16. Traditional Economy • The ways to produce products are passed from one generation to another. • Parents teach children how to produce goods and services and then those children pass it to their children. • Our society still contains some elements of a traditional economy.

17. Command Economy • The government owns most resources and make most economic decisions. • The government determines all prices, styles, colors, and even amounts of products produced. • The former Soviet Union was best know, but now Cuba and North Korea are best know for this type of economy.

18. Market Economy • People rather than the government, own the resources and run the businesses. • Profit • The difference between the cost required to create the product and the money received from selling it. • Profit = Price – Cost

19. Mixed Economy • Because our economy is a mixture of a market economy with some aspects of a command economy (government control, our system is a mixed economy. • Examples • No one is allowed to discard waste in rivers • Businesses cannot make false claims

20. Demand Is the quantity of a good or service that customers are willing and able to buy at various prices during a given time period. Demand Curve Price Quantity Demand and Supply Demand Curve

21. Supply Is the quantity of a product that producers are willing and able to make available for sale at various prices over a given time period. Supply Curve Price Quantity Demand and Supply Supply Curve

22. Equilibrium Price Is the price at which the quantity supplied exactly equals the quantity demanded of that product. Surplus Excess quantity supplied Will lower prices Shortage More demand than supplied Prices go higher Price Quantity Supply and Demand cont. Equilibrium Price Surplus Equilibrium Price Shortage

23. Consumer’s Role in the Economy • Information for the Economy • The Store sell more of one item they will order more and the Manufacturer will make more. • Prices • Company A sets a higher price than B • They have 3 basic choices if sales are slow • Lower Price • Convince customers to pay the higher price • Stop offering the product

24. What are profitable companies doing? • Selling products customers want to buy • Selling products at a price customer are willing to pay. • Taking in more money from sales than the company spends to produce the products.

25. Advertising and Consumer Decisions Types of Advertising • Brand Advertising • Advertising to cause you to remember a particular brand name. • Jingles and Slogans • Cost of band items is more. Why • Informative Advertising • Advertising designed to influence you to buy a product by educating you about that product’s benefits.

26. Types of Advertising Cont. • Comparative Advertising • The purpose of the ad is to convince you to buy the advertised product instead of the targeted competing product. • Defensive Advertising • An ad to counter attack from comparative ads. • If one company says brand X is better than brand Y. Brand Y might come back and defend that claim.

27. Types of Advertising Cont. • Persuasive Advertising • Advertising designed to appeal to your emotions to influence you to buy. But does not provide much information • Deceptive Ads and Puffery • Puffery • Innocent exaggeration • Factually Wrong • It’s Free • Customer Alert – Page 33 • Cost of Advertising – Page 35

28. Be a Responsible Consumer • Sharing Limited Resources • Protecting Public Safety • Resource Consuming Products • Water • Needs or Wants • Forrest Products • The Environment • Garbage • Other Pollutants • Recycle