Chapter 3 Your Purchasing Power

Slide 2 What Is Inflation? 3-1 Inflation and the Value of Money Inflation is an increase in prices for goods and services. Consumer Price Index (CPI) measures price changes over time. As inflation rises, the purchasing power of the dollar falls.

Slide 3 What Are the Types of Inflation? 3-1 Inflation and the Value of Money Disinflation occurs when the rate of rising prices slows down. Reflation occurs when high prices are followed by lower prices and then high prices again. Hyperinflation is rapidly rising prices that are out of control. Deflation is a decrease in prices.

Slide 4 What Are Causes and Effects of Inflation? 3-1 Inflation and the Value of Money Causes Demand-pull Cost-push Real-cost Effects Higher employment rates Less spending Less saving

Slide 5 Focus On... Fighting Inflation Monetary policy refers to the actions by the Fed to stabilize the economy. o Fed controls the discount rate, federal funds rate, and prime rate. Fiscal policy refers to the actions by the federal government to manage the economy. o Government raises/lowers taxes. 3-1 Inflation and the Value of Money

Slide 6 How Are Prices Set in a Market Economy? 3-2 Prices and Consumer Choices Cost-recovery pricing is used to recover R&D costs. Cost-plus pricing is calculated using production costs plus a markup. Value-based pricing is based on what consumers are willing to pay. Market-based pricing is set to be competitive with similar products.

Slide 7 How Do Buying Strategies Affect Prices? 3-2 Prices and Consumer Choices Rational buying o Economizing is saving money and spending only when necessary. o Optimizing is getting the highest value for money spent. Emotional buying Impulse buying

Slide 8 Success Skills 3-2 Prices and Consumer Choices Time Management Be aware of how you are using your time. Identify peak performance times. Use a daily or weekly planner. Keep a to-do list. Prioritize your activities. Break large projects into smaller parts. Do not rush important decisions.

Slide 9 What Are Selling Strategies? Meeting demand Convenience Customer service The right product and price o Examples: meet basic needs, offer brand names, use discount pricing 3-3 Getting More for Your Money

Slide 10 What Are Selling Strategies? 3-3 Getting More for Your Money Creating demand Advertising is informing consumers about products and encouraging them to buy. o Advertising sources: newspapers, magazines, TV, radio, Internet, billboards, signs, direct sales The target audience is a specific group of people who are likely to buy.

Slide 11 What Are Consumer Buying Strategies? Prepare a shopping list. Do not let a salesperson influence you. Stick to your list and avoid impulse buying. Shop when you are most alert. Comparison shop among several sellers. Keep receipts, warranties, and packaging. 3-3 Getting More for Your Money

Slide 12 Building Communications Skills Used to solve problems Involves searching through information and forming questions to ask Listener evaluates what was heard Listener reaches an informed decision or choice 3-3 Getting More for Your Money Creative Listening

Slide 13 What Are Consumer Rights? 3-4 Consumer Rights and Responsibilities Many laws protect consumers. Consumer Bill of Rights Airline Passenger Rights Consumer Technology Bill of Rights Patients’ Bill of Rights Consumer Protection Laws o Examples: Food, Drug, and Cosmetic Act; Hazardous Substances Act; Cigarette Labeling and Advertising Act; Nutrition Labeling and Education Act; FERPA; HIPAA

Slide 14 Sources of Consumer Protection 3-4 Consumer Rights and Responsibilities Federal agencies o Examples: USDA, FDA, CPSC, FCC, FTC, FAA, SEC State and local assistance Private Organizations o Examples: BBB, National Consumers League, Consumers Union

Slide 15 How Are Consumers Defrauded? 3-4 Consumer Rights and Responsibilities Deception involves false or misleading claims made about a product. Bait and switch Fake sales Low-balling Pyramid schemes Ponzi schemes Pigeon drop Infomercials

Slide 16 How Can Consumers Protect Themselves from Fraud? 3-4 Consumer Rights and Responsibilities Shop smart Be aware of prices Understand sale terminology Compute unit prices Read labels Check packages carefully Read contracts Keep receipts and warranties Compute total cost Research businesses