Introduction to Consumer Education

Rationale for this course Why are we taking Consumer Education? Required by the State of Illinois for graduation In general, Americans are bad with money. Spend too much, save too little Credit card debt….we want it now!

What is… Economics Consumer Economics Economics is the social science that analyzes the production, distribution, and consumption of goods and services. Classic economics is concerned with the study of governments and businesses. Consumer economics is a branch of economics. It is mainly concerned with microeconomic analysis behavior in units of consumers, families, or individuals.

What key topics will we discuss in Consumer Economics? Being an intelligent consumer Consumer rights Creating a budget The job search process Paychecks Taxes Buying a car/ transportation Renting/ purchasing a home Credit cards and other loans

What is an Economic System? The way in which a nation uses its economic resources to satisfy peoples wants and needs. Each economic system answers the 3 Basic Questions: 1. What should be produced? 2. How should it be produced? 3. For whom should it be produced?

Types of Economic Systems The 4 major economic systems all answer the 3 Basic Questions differently. There are 4 major types of economic systems: Traditional Command Market Mixed

Traditional Economy 3 Questions are answered according to tradition, customs, and beliefs. Ideas, skills, and rules are handed down from generation to generation. + = Known expectations, strong fam/ community. - = change/innovation is discouraged, choice is very limited, production is inefficient. Examples: Inuit of NA, Kalahari of Africa.

Command Economy In a command economy, the 3 Questions are answered by the government. Individual business owners have little say in what is produced, how much is made, etc. The government also decides how goods are distributed. + = Decisions can be made quickly, even distro of $ - = lack of incentive to work hard, be creative; also lack of choices Examples: North Korea, China, former Soviet Union

Market Economy A market economy is also known as Capitalism. The goal is to make a profit (profit=price-cost) 3 Questions are answered by individuals/ business owners with no government intervention. Prices determine themselves based on supply and demand. + = Many choices, potential for profit, creativity is rewarded, competition means lower prices, better quality. - = Those unable to work may suffer, owners may take advantage of workers, uneven distro of wealth

Mixed Economy Our economy in the U.S. is not a pure market economy. It is a combination of a market economy and a command economy….this is known as a mixed economy. Most countries have a mixed economy. Individual decision making is combined with government intervention and regulation. For example: Govt. may set the price that utility companies can charge for their product or the government may put regulations on what businesses can or cannot do.

Supply and Demand In a mixed economy, the decision to produce something, as well as it’s price, is based on supply and demand. Supply- what producers are willing to produce based on available resources. If too much is produced, producer loses money. If too little is produced, produced doesn’t make enough $ Demand- what consumers are willing to buy at a certain price. If price is too high, consumers won’t buy. Consumers want lowest price possible, but if price is too low, producers won’t make enough $. Equilibrium determines production and price. Where producer and consumer meet!

Demand Schedules

Supply/ Demand Curve Supply Curve- the amount producers are willing to produce Demand Curve- the amount consumers are willing to buy

Equilibrium (the most profitable)

Scarcity Humans have unlimited wants and needs. However, resources are finite (limited) Ex. Diamonds, food, water Therefore, most goods and services are said to be scarce (not enough resources to satisfy all wants and needs) Trade-offs (alternatives) are considered when goods are scarce.

Wants and Needs Since most of us don’t have an unlimited supply of $, consumers have to decide whether a certain item is a want or a need. Need- something you have to have Food, shelter, clothing, health care, transportation Want- something you would like to have Fine dining, mansion, Gucci, BMW

Want or Need?