Chapter © 2010 South-Western, Cengage Learning Personal Decision Making Making Better Decisions Spending Habits 20

© 2010 South-Western, Cengage Learning SLIDE 2 Chapter 20 Lesson 20.1 Making Better Decisions GOALS Apply the decision-making process to solve consumer problems. Explain economic needs and wants that influence consumer decision making.

© 2010 South-Western, Cengage Learning SLIDE 3 Chapter 20 Step 1: Define the Problem The first step in the decision-making process is to define the problem or a goal you wish to achieve.

© 2010 South-Western, Cengage Learning Step 1: Define the Problem Because your resources are limited, you may have to make a tradeoff, which involves giving up one option in exchange for another. SLIDE 4 Chapter 20

© 2010 South-Western, Cengage Learning SLIDE 5 Chapter 20 Step 2: Obtain Accurate Information List all alternative solutions and the cost of each. Use a computer at school or at public library Rent a computer when needed at a copy center or technology store Buy a used laptop Buy a new laptop

© 2010 South-Western, Cengage Learning Step 2: Obtain Accurate Information Do not consider sunk costs. A sunk cost is an expense that occurred in the past for which money was spent and cannot be recovered. SLIDE 6 Chapter 20

© 2010 South-Western, Cengage Learning Step 3: Compare Choices When you make choices, they often involve getting something in return for giving up something else (tradeoff). SLIDE 7 Chapter 20

© 2010 South-Western, Cengage Learning Step 3: Compare Choices The tradeoff results in an opportunity cost, which is the value of your next best choice—what you are giving up. SLIDE 8 Chapter 20

© 2010 South-Western, Cengage Learning SLIDE 9 Chapter 20 Step 4: Make a Decision Careful consideration of the problem, thorough information gathering, and analysis of that information. One that best meets your needs, is within your budget

© 2010 South-Western, Cengage Learning SLIDE 10 Chapter 20 Step 5: Take Action Take action to implement your chosen solution.

© 2010 South-Western, Cengage Learning SLIDE 11 Chapter 20 Step 6: Reevaluate After several months have passed, revisit your decision. Are you happy with the choice you made? If not, what could you do differently next time to make a better decision?

© 2010 South-Western, Cengage Learning Step 6: Reevaluate Should you do something different now? If your needs have changed or your initial decision isn’t working out, go through the decision-making process again to decide whether to make a change. SLIDE 12 Chapter 20

© 2010 South-Western, Cengage Learning SLIDE 13 Chapter 20 Economic Wants and Needs Basic needs are the items necessary for maintaining physical life. Food Water Shelter Clothing Basic medical care Safety and security

© 2010 South-Western, Cengage Learning Economic Wants and Needs Life-enhancing wants are items beyond basic needs that add to your quality of life. 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 SLIDE 14 Chapter 20

© 2010 South-Western, Cengage Learning SLIDE 15 Chapter 20 Individual Wants Values – are the principles by which a person lives.

© 2010 South-Western, Cengage Learning Individual Wants Personal preferences Personal preferences or tastes are your likes and dislikes. SLIDE 16 Chapter 20

© 2010 South-Western, Cengage Learning Individual Wants Discretionary income – is the money left over after you have paid your necessary expenses. SLIDE 17 Chapter 20

© 2010 South-Western, Cengage Learning Collective Values Collective values are things that are important to society as a whole. Society also influences our values, goals, and choices because it demands social responsibility from its citizens. SLIDE 18 Chapter 20

© 2010 South-Western, Cengage Learning SLIDE 19 Chapter 20 Collective Values Legal protection Property rights – private property ownership and the freedom to make individual choices are important to U.S. citizens The U.S. Constitution, the Bill of Rights and the other amendments give us individual freedoms and rights of citizenship. (continued)

© 2010 South-Western, Cengage Learning Collective Values Employment Work enables us to satisfy needs and life- enhancing wants. We strive to do the best we can and to get a job that pays well for the effort we put forth. SLIDE 20 Chapter 20

© 2010 South-Western, Cengage Learning Collective Values Progress Progress – the countries technological advances and perceptions about the importance of those advances. Innovations are new ideas, products, or services that bring about changes in the way we live. SLIDE 21 Chapter 20

© 2010 South-Western, Cengage Learning Collective Values Quality of environment Natural resources are of great value and concern because they are limited and some cannot be replaced. SLIDE 22 Chapter 20

© 2010 South-Western, Cengage Learning Collective Values Public goods Public goods are the goods and services provided by government to its citizens. SLIDE 23 Chapter 20

© 2010 South-Western, Cengage Learning SLIDE 24 Chapter 20 Lesson 20.2 Spending Habits GOALS Analyze marketing strategies that influence spending decisions.

© 2010 South-Western, Cengage Learning SLIDE 25 Chapter 20 Lesson 20.2 Spending Habits GOALS List and describe factors that influence spending decisions. Explain how to plan for major purchases. Analyze marketing strategies that influence spending decisions.

© 2010 South-Western, Cengage Learning SLIDE 26 Chapter 20 Factors that Influence Spending Personal Factors Personal resources Position in life Customs, background, and religion A custom is a long-established practice that takes on the force of an unwritten law. Values and goals

© 2010 South-Western, Cengage Learning SLIDE 27 Chapter 20 Factors that Influence Spending Outside Factors The economy The economy refers to all activities related to production and distribution of goods and services in a geographic area. Technological advances The environment Social pressures (continued)

© 2010 South-Western, Cengage Learning SLIDE 28 Chapter 20 Planning Major Purchases Questions to ask before making a purchase: 1. Why do I want this product? 2. How long will this product last? 3. What substitutes are available and at what cost? 4. By postponing this purchase, is it likely that I will choose not to buy it later? 5. What types of additional costs are involved, such as supplies, maintenance, insurance, and financial risks? 6. What is the opportunity cost of this purchase? 7. What is the total cost of this product?

© 2010 South-Western, Cengage Learning SLIDE 29 Chapter 20 Marketing Strategies Influence Spending Advertising Pricing Sales Promotional techniques

© 2010 South-Western, Cengage Learning Advertising Product advertising Advertising intended to convince consumers to buy a specific good or service is called product advertising. A target market is a specific consumer group to which the advertisements are designed to appeal. SLIDE 30 Chapter 20

© 2010 South-Western, Cengage Learning Advertising Company advertising Advertising intended to promote the image of a store, company, or retail chain is known as company advertising. Industry advertising Advertising intended to promote a general product group without regard to where these products are purchased is called industry advertising. SLIDE 31 Chapter 20 (continued)

© 2010 South-Western, Cengage Learning SLIDE 32 Chapter 20 Pricing The price of merchandise depends on several factors. Some of the factors that determine the price of a product include: Supply and demand The cost of raw materials and labor Competitive pressures Seller’s need to make a reasonable profit

© 2010 South-Western, Cengage Learning SLIDE 33 Chapter 20 Pricing Examples of pricing devices used to persuade consumers to buy: Odd-number pricing is the practice of setting prices at uneven amounts rather than whole dollars to make them seem lower. Discounts are often available for buying in large quantities. (continued)

© 2010 South-Western, Cengage Learning SLIDE 34 Chapter 20 Sales Stores advertise end-of-month sales, holiday sales, anniversary sales, clearance sales, inventory sales, and so on. A loss leader is an item of merchandise marked down to an unusually low price, sometimes below the store’s cost. The store may actually lose money on every sale of this item because the cost of producing the item is higher than the sale price. However, the loss leader is used to get customers into the store in the hope that they will buy other products as well.

© 2010 South-Western, Cengage Learning Promotional Techniques Displays Contests and games Coupons SLIDE 35 Chapter 20

© 2010 South-Western, Cengage Learning Promotional Techniques Frequent-buyer and customer-loyalty cards Packaging Sampling SLIDE 36 Chapter 20 (continued)

© 2010 South-Western, Cengage Learning Promotional Techniques Micromarketing Psychographics – is information about a person’s lifestyle, marital status, family, age, and buying habits. Micromarketing is a marketing strategy designed to target specific people or small groups who are likely to want certain products. SLIDE 37 Chapter 20 (continued)