Chapter 20: Personal Decision Making

1. Chapter 20: Personal Decision Making Asad Amirali

2. Advance to boring stuff! 20.1 Making better decisions

3. Define the problem • Tradeoff (pg.447) • Choice A- Being able to have a $1000 bonus for every paycheck with no drawbacks. • Choice B- Being able to work at home, but having more work to do. • Choice C- Giving your friend a doughnut and getting another doughnut back. • Answer- Choice B

4. Obtain Accurate information • Sunk Cost (pg.448) • Problem- Assume you need a car, which of these is a sunk cost? • Choice A- Buying a new car. • Choice B- Tuning up your old car which will make it work. • Choice C- Paying money to buy a junk car that may or may not work. • Answer- Choice C

5. Compare Choices • Opportunity Cost (pg. 449) • Choice A- Deciding whether to go to the park or to a friends house. • Choice B- Deciding whether to babysit for money or stay at home and do homework. • Answer- Choice B

6. Economic Wants • Life-enhancing wants (pg.450) • Choice A- Education • Choice B- Basic medical Care • Choice C- Clothing • Answer- Choice A

7. Economic Needs • Basic Needs (pg.450) • Choice A- Little Caesars Pizza • Choice B- Trip to Europe • Choice C- Safety+ Security • Answer- Choice C

8. Personal Preferences • Personal Preferences (pg.451) • DAILY DOUBLE! • Which do you think I like more? • Choice A- Coming to School • Choice B- Checking my stocks • Choice C- Zzzzz…. • Answer- Choice C

9. Collective Values • Collective Values (pg. 451) • Choice A- Owning a Prius or another hybrid car • Choice B- Keeping your Christmas lights on the entire day • Answer- Choice A

10. Progress • Innovations (pg. 452) • Choice A- Apple iPhone 3GS • Choice B- New Vacuum Robot • Choice C- New!! Super stretchy SUPER GUM • Answer- Choice B

11. Public • Public Goods (pg. 452) • Choice A- Police Officer Richie Rich • Choice B- Private Detective • Choice C- Private school teacher • Answer- Choice A

12. Decision Making Process • Step 1) Define the problem • Think hard about what your problem is and how you can resolve it • Laptop example, tradeoff options • Step 2) Obtain accurate information • List other viable options • Do not consider sunk costs • Make a record of your options so you can compare solutions • Step 3) Compare Choices • The tradeoff results in an opportunity cost • Sometimes convenience may be more useful than the cost • Step 4) Make a decision • Step 5) Take Action • Step 6) Reevaluate

13. Economic wants and needs • Basic needs are the items necessary for maintaining physical life. • They include food, water, shelter, clothing, and basic medical care. • You might also add safety and security to this list. • Life-enhancing wants are items beyond basic needs that add to your quality of life. • They include, but are not limited to, the following: • Food, clothing, and shelter beyond what are necessary for biological survival • Medical care to improve the quality and length of life • Education to achieve personal goals, both social and economic • Travel, vacations, and recreation to improve personal enjoyment of life • Luxury items (like a jet ski or central air conditioning) to make life more fun or comfortable

14. INDIVIDUAL WANTS • Values are the principles by which a person lives. • Different people value things differently. • Different values will lead to different actions. • Personal preferences or tastes are your likes and dislikes. • Discretionary income is the money left over after you have paid your necessary expenses. • This is the money you can spend or save as you wish. • Themore discretionary income you have, the higher the quality and quantity of products you can consider. • Leisure time is the time you get to spend doing things you like and enjoy. • Leisure time allows opportunities for rest, relaxation, and enjoyment of life. • Some people use it to develop hobbies and an avocation, or side career that is meaningful to them.

15. COLLECTIVE VALUES • Collective values are things that are important to society as a whole. • Allcitizens share in their costs and in their benefits. • Society also influences our values, goals, and choices because it demands social responsibility from its citizens. • Legal Protection • Private property ownership and the freedom to make choices are important American values and rights of citizens. • Laws protect our freedoms and we pay for these laws through taxes. • We value the Constitution and the Bill of Rights. • Employment • Most people who are able will work because it is expected in order to satisfy needs and life-enhancing wants in this society. • We try to do the best we can to be personally satisfied with our productivity and, at the same time, satisfy society’s demand for citizens who are contributing members.

16. Collective Values (cont.) • The relative state of progress of the country in which you live (its technological advances and perceptions about the importance of those advances) will affect your purchase decisions. • The United States is technologically advanced and places a high value on innovations. • s are new ideas, products, or services that bring about changes in the way we live. • They are often fun and entertaining, and they also add to the quality of life. • This quality may be the result of time savings, effort or work savings, and cost savings. • Because of our collective priority of preserving a quality environment for future generations, our society supports activities such as land-use planning, recycling, preserving natural beauty and wildlife, and establishing air pollution standards. • Environmental quality is important to society as a whole, and individuals respond to this concern by acting and purchasing accordingly. • Americans place high value on government provided services for all citizens, from police protection to public parks. • Public goods are the goods and services provided by government to its citizens. • Theyare provided by government because private business could not do so efficiently.

17. Advance to boring stuff! Spending Habits

18. Personal Factors • Custom (pg. 455) • Which of the following customs would influence my buying decision to buy protective gear? • Choice A- Cheese-Rolling in Gloucester, England • Choice B- Bouncing babies in India • Choice C- Spitting in Greece – for luck • Answer- Choice A

19. The economy • Economy (pg.456) • Over the last few years, has the U.S economy grown or slowed? • Choice A- Grown with major fluctuations • Choice B- Slowed with major fluctuations • Choice C- Grown with minor fluctuations • Choice D- Slowed with minor fluctuations • Answer- Choice D

20. Product Advertising • Product advertising (pg. 459) • Which of the following would be considered a “bandwagon”? • Choice A- Listening to Britney Spears talk about her new perfume line • Choice B- Getting an iPhone when all of your friends have one • Choice C- Listening to HEADON commercials’ • Answer- Choice B

21. Target MArket • Target Market ( pg.460) • What are teenagers a target market for? • Choice A- Fischer Price Toys • Choice B- Acne medication • Choice C- Car insurance • Answer- Choice B

22. Company Advertising • Company Advertising (pg. 460)

23. Industry Advertising • Industry Advertising (pg.460) • Choice A- When cereal is promoted for being healthy and delicious • Choice B- When steel is promoted as being weak and unsuitable • Choice C- When Apple receives credit for being a reliable company. • Answer- Choice A

24. Pricing • Odd number pricing (pg.460) • Choice A- $4.99 • Choice B- $6.01 • Choice C- 25% of $6.00 • Answer- Choice A

25. Sales • Loss Leader (pg.461) • Which sort of people buy loss leaders? (More than one choice is applicable) • Choice A- Cherry Pickers • Choice B- Smart, economic buyers • Choice C- Rich people • Answer- Choice A,B,C

26. Micromarketing • Micromarketing (pg. 462) • Micromarketing would target which of the following? • Choice A- Target people who go on a company’s website • Choice B- Target a small family who buys health insurance. • Choice C- Target people who shop at the mall. • Answer- Choice B

27. Personal Factors • Factors that influence your spending choices. • Include things such as position in life, customs, background, religion, values, and goals. • Personal resources • Include time, money, energy, skills and abilities, and available credit. • The more you possess the more purchasing power you have. • Position in life • Factors such as age, marital status, gender, employment status, living arrangements, and lifestyle. • Customs, backgrounds, religion • A custom is a long-established practice that takes on the force of an unwritten law.

28. Personal Factors (Cont) • Values and Goals • Values are intrinsic, commonly understood, and slow to change, but they do change over time. • Goals change often. • Individual and family values and goals are expressed through choices of entertainment, literature, sports, luxuries, and so on. • These choices are reflected in decisions to purchase goods and services, use of time, and attitudes toward accumulating possessions. • Name three goals high school kids have.

29. Outside Factors • The economy • The economy refers to all activities related to production and distribution of goods and services in a geographic area. • Economists measure economic activity to describe the financial well-being of the region or the nation. • When the economy is strong and growing, people travel more, dine out more, and buy more goods and services. • Business cycle, where the economy is growing or slowing. • Technological Advances • The Environment • Social Pressures

30. Cash or Credit?

31. Research before buying • Comparison shopping will allow you to determine whether you are getting the best quality for the price. • By shopping at various retail outlets you may be able to save money. • Take advantage of store policies that will refund part of your purchase price if the item you buy goes on sale within the next two weeks or months. • This policy, together with a liberal return policy, should affect your choice of merchants. • For example, a store that allows you to return a purchase within a reasonable period of time (a month or more) is much better than a store that will not accept returns or give refunds.

32. QUALITY AND PRICE • It pays to be aware of what is good quality and what you should expect from the merchandise. • ConsumersUnion is a nonprofit organization that tests the quality of many products and compares different brands. • You can also find product reviews in specialty magazines and web sites. • However, keep in mind that reviews by for-profit organizations could be influenced by the manufacturers that advertise in the magazine or on the web site. • For major purchases, check reviews in several sources before making your choice.

33. Advertising • The primary goal of all advertising is to create within the consumer the desire to purchase a product or service. • Some advertising is informational and valuable; other advertising is false and misleading. • Product Advertising- Advertising intended to convince consumers to buy a specific good or service • Advertisers often repeat the product name several times during commercials to help consumers remember it. • Many ads feature famous athletes, actors, or other celebrities. • Target Market- specific consumer group to which the advertisements are designed to appeal. • Company advertising- intended to promote the image of a store, company, or retail chain. • Name three companies that you know that do this.

34. Advertising (cont) + Pricing • Industry Advertising • Advertising intended to promote a general product group without regard to where these products are purchased • Pricing • Odd-Number Pricing • Practice of setting prices at uneven amounts rather than whole dollars to make them seem lower. • For example, the price tag might read 99 cents instead of $1.00. • Because the price is under a dollar, it seems lower. • Loss Leader • item of merchandise marked down to an unusually low price, sometimes below the store’s cost. • Cherry Picker is what?

35. Promotional Techniques • Displays • Contests and Games • Coupons • Frequent buyers and Customer-Loyalty Cards • Packaging • Sampling • Micromarketing • Marketing strategy designed to target specific people or small groups who are likely to want certain products.

36. Wrapping up • Decision making process is what? • Basic Needs are what? • Life-enhancing wants are what? • Name some advertising options.