Bell Work Write down what you think the attributes of a successful person are? © 2010 South-Western, Cengage Learning

CHAPTER 1 CONSUMERS The Engine That Runs the Economy Economic Education for Consumers 4/17/2017 CHAPTER 1 CONSUMERS The Engine That Runs the Economy WHAT’S AHEAD 1.1 Decisions, Decisions 1.2 Make Decisions 1.3 Understand Economic Systems 1.4 Consumer’s Role in the Economy 1.5 Advertising and Consumer Decisions 1.6 Be a Responsible Consumer Chapter 1

LESSON 1.1 Decisions, Decisions Objectives Identify several important values you hold. Explain how creating a life-span plan helps you make better decisions. Describe what an opportunity cost is. © 2010 South-Western, Cengage Learning

KEY TERMS values goals needs wants long-term goals life-span life span goals life-span plan short-term goals opportunity cost © 2010 South-Western, Cengage Learning

You’ve Got the Power Values Values change Different people, different values Life Values Work Values Cultural Values Social Values Demographic Values © 2010 South-Western, Cengage Learning

Goals Needs and wants Hopes and dreams A life-span plan Ipod: need or want? McDonald’s: need or want? Hopes and dreams A life-span plan BHAG (Big Hairy Audacious Goals) Short-term goals Work to reach your goals © 2010 South-Western, Cengage Learning

Opportunity Cost Opportunity cost and decisions Consider other options The value of the next best alternative Consider other options Less money More time © 2010 South-Western, Cengage Learning

Checkpoint 1.1 What are the various ways values can be classified? How can creating a life-span plan help you make better decisions? What is opportunity cost? Give an example. © 2010 South-Western, Cengage Learning

Checkpoint 1.1 answers What are the various ways values can be classified? Values are the principles, or standards, by which you live. Life values Work values Cultural values Social values Demographic values © 2010 South-Western, Cengage Learning

Checkpoint 1.1 answers How can creating a life-span plan help you make better decisions? A life-span plan is a strategy you create to help you achieve your long-term goals. You can use this plan to help you make decisions and identify the actions to take as you work toward your goals. © 2010 South-Western, Cengage Learning

Checkpoint 1.1 answers What is opportunity cost? Give an example. Opportunity cost is the value of your next best alternative whenever you make a choice. Examples: go to college or get a job right now save for a new car or take a vacation go out for a nice dinner or do pizza and a movie tonight © 2010 South-Western, Cengage Learning

Bell Work Write down a product you have purchased recently? Was it a good decision or one you regretted later? © 2010 South-Western, Cengage Learning

Objective LESSON 1.2 Make Decisions Describe each of the five steps in the decision making process. © 2010 South-Western, Cengage Learning

KEY TERM rational buying decision © 2010 South-Western, Cengage Learning

Decision Making Process Specify Search Sift Select Study © 2010 South-Western, Cengage Learning

Specify Need or want? Goals Values © 2010 South-Western, Cengage Learning

Search Plan your search Avoid impulse purchases Examples of impulse buys Candy Music ??? © 2010 South-Western, Cengage Learning

Sift Look at your options Look at your opportunity costs © 2010 South-Western, Cengage Learning

Select Compare the benefits and costs Decide © 2010 South-Western, Cengage Learning

Study You can learn important lessons from the results of your actions Would you do the same thing again? If so, why? If not, what would you do differently? © 2010 South-Western, Cengage Learning

Checkpoint 1.2 Describe each of the five steps in the decision making process. © 2010 South-Western, Cengage Learning

Checkpoint 1.2 answer Describe each of the five steps in the decision making process. Specify: Identify specific need or want; determine your goals Search: Gather information about your alternative choices Sift: Evaluate your options; consider your opportunity costs Select: Make a choice and act on it Study: Evaluate the results of your choice © 2010 South-Western, Cengage Learning

Bell Work Hand in homework Write down how you think companies come up with a price to charge for a product. What consideration do they have to make? © 2010 South-Western, Cengage Learning

LESSON 1.3 Understand Economic Systems Objectives Describe four economic systems. Explain how demand and supply work. © 2010 South-Western, Cengage Learning

KEY TERMS production resources economics profit scarcity demand supply equilibrium price © 2010 South-Western, Cengage Learning

Economic Systems Traditional economy Command economy Produce products passed from one generation to another Did the U.S. ever have this type of economy? Command economy Government owns most resources Makes most economic decisions © 2010 South-Western, Cengage Learning

Economic Systems Market economy Mixed economy People own the resources and businesses No government intervention. Mixed economy Has both people and government control resources and businesses © 2010 South-Western, Cengage Learning

Demand and Supply Demand Supply Equilibrium © 2010 South-Western, Cengage Learning

Demand Curve y Demand curve Price x Quantity © 2010 South-Western, Cengage Learning

Supply Curve y Supply curve Price x Quantity © 2010 South-Western, Cengage Learning

Equilibrium Price y Supply curve Demand curve Price $1 x 100 Quantity © 2010 South-Western, Cengage Learning

Surplus Graph y $2 Supply curve Demand curve Price $1 x 50 100 150 Quantity © 2010 South-Western, Cengage Learning

Shortage Graph y Supply curve Demand curve Price $1 $0.50 x 75 100 125 Quantity © 2010 South-Western, Cengage Learning

Checkpoint 1.3 What are the primary characteristics of each of the four economic systems? How do demand and supply work together to determine prices and how much producers will produce? © 2010 South-Western, Cengage Learning

Shortage, Surplus or Equalibrium Milk PS3 (at release) iTouch 30G Gasoline (at 4 dollars a gallon) Housing (Nation wide) © 2010 South-Western, Cengage Learning

Checkpoint 1.3 answers What are the primary characteristics of each of the four economic systems? Traditional economy: the ways to produce products are passed from one generation to the next Command economy: the government owns most resources and makes most economic decisions Market economy: people, rather than the government, own the resources and run the businesses Mixed economy: a mixture of a market economy with some aspects of a command economy, for example © 2010 South-Western, Cengage Learning

Checkpoint 1.3 answers How do demand and supply work together to determine prices and how much producers will produce? Producers are willing to offer more of a product for sale at a higher price than at a lower price As the price rises, the quantity supplied increases (and price decreases) As price decreases, the quantity supplied decreases (and price increases) Supply curve Price Quantity © 2010 South-Western, Cengage Learning

Bell Work Read “Consumer Action” on page 23. Come up with 2 or 3 ideas on how she can become more profitable. © 2010 South-Western, Cengage Learning

LESSON 1.4 Consumer’s Role in the Economy Objective Explain the role of consumers in determining what is produced in a market economy. © 2010 South-Western, Cengage Learning

KEY TERMS consumer consumer economics © 2010 South-Western, Cengage Learning

Making Decisions in a Market Economy Information for the economy Exchanges provide vital information to make the economy work. What information can be gathered by a purchase? Prices Three choices (lower price, convince customer to pay higher price, stop production) © 2010 South-Western, Cengage Learning

Making Decisions in a Market Economy The profit motive Reduce Costs Change Price Increase Quantity of Products Sold Consumer economics Adam Smith (consumer sovereignty) You are in charge © 2010 South-Western, Cengage Learning

Making Decisions in a Market Economy Benefits of competition Why is competition good? Efficiency and Profits Profitable companies are: Selling products that are wanted Selling products that people will pay for Making more revenue than expenses © 2010 South-Western, Cengage Learning

Checkpoint 1.4 How do demand and supply act together in a market economy to set the equilibrium price for a product? © 2010 South-Western, Cengage Learning

Checkpoint 1.4 answer How do demand and supply act together in a market economy to set the equilibrium price for a product? Profits result from selling products for more than it costs to make them To earn a profit, businesses must produce products that consumers buy When consumers spend their money, they determine what products are produced At the equilibrium price, consumers are willing and able to buy the same amount of the product as producers are willing and able to supply © 2010 South-Western, Cengage Learning

Bell Work Hand in homework What are some of your favorite commercials and why? What product are they trying to sell? © 2010 South-Western, Cengage Learning

LESSON 1.5 Advertising and Consumer Decisions Objectives Describe different types of advertising. Explain how you can recognize deceptive advertising. © 2010 South-Western, Cengage Learning

KEY TERMS advertising puffery © 2010 South-Western, Cengage Learning

Types of Advertising Brand advertising Informative advertising Get you to remember a particular brand name. Use of jingles or slogans and past benefits. Usually more expensive product because of a lot of advertising Informative advertising Focuses on benefits of the product © 2010 South-Western, Cengage Learning

Types of Advertising Comparative advertising Defensive advertising Tells you why the product is better than another. 20% more, cheaper, more efficient. Defensive advertising Often used to respond to claims made by other companies Politicians love these © 2010 South-Western, Cengage Learning

Types of Advertising Persuasive advertising Designed to appeal to your emotions to influence you Does not provide much information SPCA Benefits and costs of advertising 280 Billion spent each year Informs more people so they buy your product © 2010 South-Western, Cengage Learning

Deceptive Ads versus Puffery Innocent exaggeration “fish story” Factually wrong Exaggerated claims are legal Is it free? No such thing as a free lunch. Protecting yourself from deceptive advertising Use the decision making process we talked about last week. © 2010 South-Western, Cengage Learning

Checkpoint 1.5 Identify and describe characteristics of each of the types of advertising presented in this lesson. How can you recognize and protect yourself from deceptive advertising? © 2010 South-Western, Cengage Learning

Checkpoint 1.5 answers Identify and describe characteristics of each of the types of advertising presented in this lesson. Brand advertising: helps consumers to recognize brand name Informative advertising: influences buying behavior by educating the consumer Comparative advertising: compares product qualities to competing products’ qualities Defensive advertising: counters competitors’ advertising claims Persuasive advertising: appeals to consumers’ emotions © 2010 South-Western, Cengage Learning

Checkpoint 1.5 answers How can you recognize and protect yourself from deceptive advertising? Approach buying decisions in an organized, logical manner Gather information from several sources (in addition to the advertisement) Evaluate the information Consider alternative choices © 2010 South-Western, Cengage Learning

LESSON 1.6 Be a Responsible Consumer Objectives Identify ways in which your consumer decisions affect other people. Explain why you should use resources responsibly. © 2010 South-Western, Cengage Learning

KEY TERM global warming © 2010 South-Western, Cengage Learning

Consumers in Society Sharing limited resources Limited number of raw materials Heating Oil Water Protecting public safety Why do we have laws and punishments? © 2010 South-Western, Cengage Learning

Using Natural Resources Resource consuming products Water Forest products The environment Encourage business responsibility Dispose of waste responsibly Respect your neighbors © 2010 South-Western, Cengage Learning

Checkpoint 1.6 How can your consumer choices affect the people around you? What can you do to be a more environmentally responsible consumer? © 2010 South-Western, Cengage Learning

Checkpoint 1.6 answers How can your consumer choices affect the people around you? The earth’s natural resources are limited and not quickly replaced To be environmentally responsible, use resources in moderation and recycle or conserve them © 2010 South-Western, Cengage Learning

Checkpoint 1.6 answers What can you do to be a more environmentally responsible consumer? Consider how your choices affect the use of resources and their impact on the environment Dispose of waste responsibly Encourage businesses to act responsibly through your buying decisions Recognize that you live in a world community and act with consideration toward others © 2010 South-Western, Cengage Learning