CHAPTER 1 CONSUMERS The Engine That Runs the Economy Economic Education for Consumers 4/24/2017 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 GOALS 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 opportunity cost © 2010 South-Western, Cengage Learning

KEY TERMS values – your principles-the standards by which you live. goals – the things you want to accomplish in your life. needs – things you cannot live without. wants – things that you would like to have but can live without. opportunity cost – the value of your next best alternative whenever you make a choice.

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

Goals Needs and wants Hopes and dreams A life-span plan – a strategy people create to help them achieve their life-span goals. Short-term goals – things you hope to accomplish within a year. Work to reach your goals – knowing your goals is just the first step. The next step is to plan how to reach them. © 2010 South-Western, Cengage Learning

Opportunity Cost Opportunity cost and decisions Consider other options Every decision has an opportunity cost. Consider other options © 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

GOAL 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 © 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

LESSON 1.3 Understand Economic Systems GOALS 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 Market economy Mixed economy © 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

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

LESSON 1.4 Consumer’s Role in the Economy GOAL 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 Prices The profit motive Consumer economics Consumers in charge Benefits of competition Efficiency and profits © 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

LESSON 1.5 Advertising and Consumer Decisions GOALS 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

KEY TERMS advertising – a paid form of communication sent out by a business about its product or service. puffery – innocent exaggeration in advertising. (Note: Puffery is legal, Deceptive advertising is not).

Types of Advertising Brand advertising – designed to cause you to remember a particular brand name. Informative advertising – designed to influence you to buy a product by educating you about the product’s benefits. Comparative advertising – designed to convince you to buy the advertised product instead of a targeted competing product. Defensive advertising – designed as a counter-attack to respond to claims made by other companies. Persuasive advertising – designed to appeal to your emotions to influence you to buy. © 2010 South-Western, Cengage Learning

Deceptive Ads versus Puffery Factually wrong Exaggerated claims are legal Is it free? Protecting yourself from deceptive advertising © 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 GOALS 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 Protecting public safety © 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