1. Your Role as a Consumer

2. Disposable and Discretionary Income Disposable – Income a person has left after all taxes have been paid – Used to buy necessities Discretionary Income – Leftover income which can be saved or spent on luxury items or entertainment

3. Factors impacting Earning Power Education Occupation Experience Health Location

4. Decision Making First decision – Whether to buy an item or not Do you need the item? Did you consider the trade-offs involved

5. Deciding on the Right Purchase Scarce Resources – Income and time Opportunity costs – Value of highest alternative choice you didn’t make Quality of goods – High quality = high cost – Low quality = low cost

6. Rational Choice – Alternative that has the greatest perceived value – Choosing the best-quality item that is least expensive from among comparable-quality goods

7. Buying Principles or Strategies Three basic buying principles – Gathering Information – Using Advertising Wisely – Comparison Shopping

8. Gathering Information Can be costly because it involves time – Value of time and effort spent gathering information should not be greater than the value you receive from making the best choice of product for yourself

9. Using Advertising Wisely Competitive Advertising – Attempts to persuade consumers that a product s different from and superior to any other – Purpose is to take customers away from competitors

15. Informative Advertising – Benefits consumers by giving information about a product Existence of product Price Quality Special features

16. Bait and Switch Deceptive advertising Bait – Advertised item at an unrealistically low price Unavailable when you get to the store

17. Switch – Salesperson shows you more expensive model – Points out all the better features Illegal practice

18. Comparison advertising Getting information on the types and prices of products available from different stores or companies

19. Things to consider – Warranties Promise made by manufacturer or seller to repair or replace products within a certain time period if it is faulty – Brand-Name vs Generic products

20. Going into Debt

21. What is Credit? Receiving of funds either directly or indirectly to buy goods and services today with the promise to pay for them in the future Amount owed = principal + interest – Principal is amount originally borrowed – Interest is amount borrower must pay for use of someone else’s $

22. When you receive credit, you are borrowing funds and going into debt Taking a loan is the same as credit – You must pay interest for the use of someone else’s purchasing power - $

23. Installment Debt Loan repaid with equal payments, or installments, over a period of time – 36 equal payments over 36 months Durable goods – Manufactured items that last longer than three years Cash

24. Payments depend on size of loan and length of installment period – Longer repayment period means smaller payments – Trade-off is greater interest charged

25. Mortgages Largest form of installment debt $ owed on real property – Houses, buildings, land People consider this a necessary payment – Not like other debt

26. Why people use Credit People believe they require goods immediately – Don’t want to wait Spread payments over the life of the item purchased – Car or truck

27. Charge Accounts Credit extended to a consumer allowing them to buy goods or services from a particular company and pay for them later Regular charge accounts – 30-day charge – Credit limit – Must be paid at the end of period – If not paid in full, interest is charged

28. Revolving Charge Account – Make additional purchases even if you havent paid in full – 20% of bill each month Installment Charge Account – Equal payments spread over time

29. Credit Cards Allows a person to make purchases without paying cash Can be used at many kinds of stores, restaurants, hotels, and other businesses Visa, MasterCard and some banks

30. Applying for Credit Creditworthiness – Fill out credit application – Credit bureau will perform a credit check Income Current debts Details about personal life How well you repaid past debts

31. Credit Rating Rating of the risk involved in lending money to a person or business Good, Average, or Poor ratings – Determined by multiple factors Capacity to pay Character Collateral you might have

32. Secured Loans – Loan backed by collateral – If loan isn’t repaid lender gets to take collateral Unsecured loans – Loan guaranteed by promise to repay it – Usually requires a cosigner Promise to repay loan if borrower cannot