Economics & the Consumer Chapter 19 1/13/2019

Chapter Objectives: After completing this chapter, you should be able to: Define a free-enterprise system and identify producers & consumers Describe the marketplace & explain why prices go up and down Explain three factors to consider when measuring the economy’s health Identify ways to make wise shopping decisions Identify common types of fraud & ways to protect yourself as a consumer 1/13/2019

Economics (19.1) Field of study that tries to explain how people produce, distribute, & use goods and services The way people participate in these activities depends on the economic system of the country where they live 1/13/2019

Economic system A country’s way of using resources to provide goods & services that its people want & need Types of Economic systems Traditional – Traditions and customs Command – Government run Market – Buyers & sellers make decisions Mixed - Some characteristics of all three 1/13/2019

Free-Enterprise System Individuals or business may buy & sell and set prices with little government interference. Government role: create laws, set safety standards, regulate prices & wages, & protect consumers Marketplace- where buying & selling occur First…the U.S. uses a free enterprise system. 3. face-to-face, on line, over the phone, etc. 1/13/2019

Price fluctuations Supply & demand Production costs Competition When supply > demand (prices decrease) When demand > supply (prices rise) Production costs When they rise, the price goes up too They must sell their products at a higher price than it costs to produce them Competition High competition = low prices No competition = high prices 1/13/2019

Business Cycle Prosperity Recession. Depression Recovery Period of economic growth…low unemployment & high output Recession. Unemployment rises, fewer goods & services are produced, consumer spending falls Depression Long recession. Very low spending & very high unemployment. Poverty rises Recovery Period of renewed growth in economy 1/13/2019

Measuring the economy Gross domestic product (GDP) Total dollar value of all goods & services produced in the United States Main indicator of the condition of our economy Consumer price index (CPI) Measures changes in the prices of consumers goods & services (Inflation) Unemployment Percentage of labor force that is without work but actively seeking employment 1/13/2019

Smart shopping (19.2) Pay attention to quality Plan timing of your purchases (if possible) Take advantage of discount stores Consider buying used or second-hand goods Explore online options you’ll save money in the long run by buying well-made items You’ll find more bargains at certain times of the year 5. Online prices can be surprisingly low & more convenient too 1/13/2019

Buyer Beware! Consumer fraud Fraudulent advertising (bait and switch) Dishonest business practices used by people who are trying to trick or cheat you Fraudulent advertising (bait and switch) Auto repair fraud Phony prize notifications 2. A retailer advertises a bargain (bait) to lure people in the store. When the customers arrive, the store is “out” of the item. A salesperson tries to sell a similar product at a much higher price. This is the (switch) 3. Dishonest auto mechanics try to charge you much more than the estimated cost of a repair. 4. don’t provide credit card or checking account # info for willing “grand prizes.” 1/13/2019

Groups that protect consumers Federal Trade Commission (FTC) Enforces rules about labeling, advertising, & warranties Warranty – guarantee that a product meets certain quality standards Consumer Product Safety Commission (CPSC) Helps protect the public against dangerous products. Food & Drug Administration (FDA) Enforces laws about quality & labeling of food, drugs, & medical devices 1. Thanks to the FTC, the labels in your clothes provide care instructions 1/13/2019