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ECONOMIC EDUCATION FOR CONSUMERS
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
ECONOMIC EDUCATION FOR CONSUMERS
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.
Slide 2
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
KEY TERMS
Slide 3
 values
 life-span
 goals
 life span goals
 needs
 life-span plan
 wants
 short-term goals
 long-term goals
 opportunity cost
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
You’ve Got the Power
►Values
►your principles, or the standards by which you live
►These are judgments based on what you decide is right
or wrong, good or bad, important or unimportant
►Life values – the principles that are most important to
you in life
►Work values – the principles that are most important to
you at work
Slide 4
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
You’ve Got the Power
►Cultural values – principles that are important to you
based on your ethnic heritage or religion
►Social values – principles that are important to you
because of the community in which you live
►Demographic values – principles that are important to
you because of how and where you live
►Demography – the study of population
Slide 5
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
You’ve Got the Power
►Values change as you learn, grow, and experience life
►Different people, different values
►Different people make different choices based on their
own values
►Doesn’t make you right or wrong, usually just different
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Goals
►Needs
►Things you cannot live without
►Food, water, clothing, shelter
►Wants
►Things that you would like to have but can do without
►PS-3, X-box
►Hopes and dreams
►What do you want to do for a living?
►How do you see your life playing out?
Slide 7
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
A life-span plan
►When you are young, you will set long-term goals that
you will want to achieve throughout your life span
►A life span is the time from your birth to your death
►Life-span goals are the most important long-term goals
that you hope to reach during your life span
►College degree, owning a business, sports car, family
►Life-span plan – the strategy to help people achieve life
span goals
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© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Goals
►Short-term goals
►Things you hope to accomplish within a year
►Saving money for an upcoming expense
►Work to reach your goals
►Generally the steps that you will take that get you to
accomplishing your goals
Slide 9
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Opportunity Cost
►The value of your next best alternative whenever you
make a choice
►Opportunity cost and decisions
►Need to consider things that you will have to give up or go
without in order to get something you want
►Consider other options
►Maybe you will need to work and save for a longer period
of time
Slide 10
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 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.
Slide 11
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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
Slide 12
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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.
Slide 13
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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
Slide 14
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
LESSON 1.2
Make Decisions
GOAL
►Describe each of the five steps in the decision making
process.
KEY TERM
►rational buying decision – a choice made in an
organized, logical manner
Slide 15
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Decision Making Process
►Specify
► Identify the need or want you are trying to fulfill, determine your goals
►Search
► Gather information about your choices
►Sift
► Evaluate your options
►Select
► Make a choice and act on it
►Study
► Evaluate the results of your choice
Slide 16
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Specify
►Need or want?
►Goals
►What do you really want to accomplish from the
purchase?
►Do you have enough money to pay for what you want?
►Values
►The principles that work best for the person that holds
them
►Will change as you change
Slide 17
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Search
►Having a plan will help you make rational decisions
►Plan your search
►Comparison shop
►Get information on your product
►Avoid impulse purchases
►Usually are the most expensive purchases
►A purchase made on a whim that does not utilize a
decision-making process
►Potential to be a good choice, but usually is not
Slide 18
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Sift
►Look at your options
►More expensive may not always be bad in long-term
►Weigh all of your opportunity costs
►Look at your opportunity costs
►Evaluating benefits and costs of options is an important
step in the decision-making process
►What else could you get for the money you are about to
spend?
Slide 19
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Select
►Compare the benefits and costs
►Decide
►This is where you buy the item
Slide 20
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Study
►You can learn important lessons from the results of
your actions
►Learning is an ongoing process
►You can learn important lessons from your decisions
►Would you do the same thing again? If so, why?
►If not, what would you do differently?
Slide 21
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Describe each of the five steps in the decision
making process.
Slide 22
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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
Slide 23
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
LESSON 1.3
Understand Economic Systems
GOALS
►Describe four economic systems.
►Explain how demand and supply work.
Slide 24
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Economic Systems
►Production
►The creation of goods and services
►Resources
►Things that are used to create other goods and services
►Human Resources
►
The skills, training, and abilities people have to complete the
tasks involves in the production of goods and services
►Nonhuman Resources
►
Slide 25
Raw materials, tools, manufactured products used to make
goods and services
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
•
Slide 26
Chapter 1
The study of how we make use of our resources
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Economic Systems
►Traditional economy
►Production methods are passed on from generation to
generation
►Parents teach the children how to produce goods and
services
►Command economy
►Government controlled
►Government determines what to produce, how to produce
it, the prices, styles, colors, amounts
►Even your role is determined for you
Slide 27
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Economic Systems
►Market economy
►Primarily found in industrialized countries
►People are free to succeed/fail, go into whatever (legal)
business that they want to
►Goal is to earn a profit
►Profit = Price – Cost
►
The difference between money received from selling a product
and the cost of producing that product
►Mixed economy
Slide 28
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Economic Systems
►Mixed economy
►Limited government control (price ceilings in the utility
industry)
►Regulations on businesses (dumping hazardous wastes)
►Regulate false business claims
Slide 29
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Demand and Supply
►Demand
►The quantity of a good or service that consumers are
willing and able to buy at various prices
►Supply
►The quantity of a good or service that producers are
willing and able to make available at various prices over a
given time period
►Scarcity
►The situation in which consumers’ wants and needs are
greater than the resources available to satisfy those
wants and needs
Slide 30
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Demand and Supply
►Equilibrium price
►The price at which the quantity supplied exactly equals
the quantity demanded of a product
►Surplus
►When more of a good is produced than is demanded,
prices usually tend to go down
►Shortage
►Demand exceeds supply
Slide 31
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Demand Curve
Price
y
Demand
curve
x
Quantity
Slide 32
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Supply Curve
y
Price
Supply
curve
x
Quantity
Slide 33
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Equilibrium Price
y
Supply
curve
Price
Demand
curve
$1
x
100
Quantity
Slide 34
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Surplus Graph
y
Surplus
Price
$2
Supply
curve
Demand
curve
$1
x
50
Slide 35
100
Quantity
150
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Shortage Graph
y
Supply
curve
Price
Demand
curve
$1
$0.50
Shortage
x
75 100 125
Quantity
Slide 36
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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?
Slide 37
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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
Slide 38
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
 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
supplied increases (and price
decreases)
• As price decreases, the quantity
supplied decreases (and price
increases)
Slide 39
Price
• As the price rises, the quantity
Supply
curve
Quantity
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
LESSON 1.4
Consumer’s Role in the Economy
GOAL
►Explain the role of consumers in determining what is
produced in a market economy.
KEY TERMS
►consumer
►consumer economics
Slide 40
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Making Decisions
in a Market Economy
►Information for the economy
►Exchanges in a market economy make the economic
system work
►Merchants
►Gain information about buying habits that allow them to
stock what people want
►Manufacturers
►Gain information on what to produce from merchants
►Help to determine employment rates
Slide 41
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Making Decisions
in a Market Economy
►Prices
►Provide information that influences a market
economy
►Lead to profits so owners want to pay close
attention to own prices as well as competitor
prices
Slide 42
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Making Decisions
in a Market Economy
►The profit motive
►This is the reason that businesses operate in
a market economy
►Three ways to increase profits
►Reduce costs
►Change price
►Increase quantity of products sold
Slide 43
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Making Decisions
in a Market Economy
►Consumer economics
►The study of the role that consumers play in
an economic system
►Consumer –
►Anyone who buys or uses products
►Most of the time, consumers purchase the
products they consume
Slide 44
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Making Decisions
in a Market Economy
►Consumers in charge
►Consumer choices determine what goods
and services are produced
►Sovereignty – to be in charge of something
►A business that sells no products earns no
profits
Slide 45
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Making Decisions
in a Market Economy
►Competition is the contest among sellers to
win customers
►Benefits of competition
►Lower prices
►Higher quality products
►Increased customer service
Slide 46
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Making Decisions in a Market Economy
►Efficiency and profits
►Businesses use resources to create goods and services.
This costs money.
►Through competition, companies must find ways to use
their resources efficiently
►Profitable companies do three things
►Sell products consumers want to buy
►Sell products at a price consumers are willing to pay
►Take in more money from sales than is spent to produce
the products
Slide 47
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
How do demand and supply act together in a
market economy to set the equilibrium price for a
product?
Slide 48
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
 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
Slide 49
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
LESSON 1.5
Advertising and Consumer Decisions
GOALS
►Describe different types of advertising.
►Explain how you can recognize deceptive advertising.
Slide 50
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
KEY TERMS
 advertising
 puffery
Slide 51
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Types of Advertising
►Brand advertising
►Advertising that causes you to remember a particular
brand name
►Accomplished through:
►Jingles and Slogans
►Benefits of brands – often accentuates quality
►Costs of Brand Advertising
►Sometimes results in price increases
►Unfamiliar brands or unbranded products can often have
similar quality, just less expensive
Slide 52
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Types of Advertising
►Informative advertising
►Provides information about a product or service that
leads to better buying decisions
►Downsides to the products are usually not part of this
advertising
Slide 53
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Types of Advertising
►Comparative advertising
►Generally done by comparing a product to a competitor
►Supply useful information about the product
►Highlight competitor’s weaknesses and how a product is
better
►Weaknesses may be exaggerated though
Slide 54
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Types of Advertising
►Defensive advertising
►Generally done to counter an attack by a competitor
►Don’t provide a complete or balanced picture of a
product
►Use defensive ads just like comparative ads, to get
increased product information
Slide 55
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Types of Advertising
►Persuasive advertising
►Designed to appeal to emotions to cause consumer to
buy
►Focus on creating a desire to buy the product rather than
providing information
►Usually feature attractive, happy people
►Common in cosmetic industry
►Probably gives unrealistic view of the benefits of
owning a product
Slide 56
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Types of Advertising
►Benefits and costs of advertising
►More than $280 billion is spent each year on advertising
►Passed on to consumer indirectly in the price paid for
products and services
►Increased sales could benefit consumer as business
mass produce items to keep up with demand
►Cost benefits to consumers may or may not happen
Slide 57
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Deceptive Ads versus Puffery
►Puffery
►Exaggerated claims about a product
►Exaggerated claims are legal
►Factually wrong
►Not legal, considered to be deceptive advertising
►Companies may have to prove claims
►Is it free?
►Be careful to ensure that a free item from a purchase is
not built into the price of the product
►Protecting yourself from deceptive advertising
►Always use the decision-making process
Slide 58
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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?
Slide 59
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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
Slide 60
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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
Slide 61
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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.
Slide 62
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Consumers in Society
►Sharing limited resources
►Society can produce a limited number of goods and
resources
►Gasoline is an example of a scarce resource, as is clean
air
►Protecting public safety
►Done through rules set by government
Slide 63
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Using Natural Resources
►Resource consuming products
►Gasoline is fast becoming scarce
►Fuel efficient cars, but at what cost?
►You need to think about the impact of your buying
decisions on the environment
Slide 64
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Using Natural Resources
►Water
►Population growth leads to water shortages
►Water bans used in West
►Use water in moderation and don’t pollute it
Slide 65
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Using Natural Resources
►Forest products
►Trees benefit us in so many ways, primarily oxygen
►Recycling paper products
►More effort is needed
Slide 66
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Using Natural Resources
►The environment
►Global warming
The gradual increase in the earth’s average temperature
► Burning garbage adds pollutants in the atmosphere
► Some trash in landfills never breaks down
► Technology in landfills can pollute ground water
►
►This is a big problem!!!!!!!!!!!!!!!!
Slide 67
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
Using Natural Resources
►Encourage business responsibility
►Consumer boycotts of businesses that are not
environmentally responsible
►As a consumer, use the power of the pocket-book
►Dispose of waste responsibly
►Respect your neighbors
►Consume responsibly
►Conserve
Slide 68
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
How can your consumer choices affect the
people around you?
What can you do to be a more environmentally
responsible consumer?
Slide 69
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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
Slide 70
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS
Chapter 1
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
Slide 71
© 2010 South-Western, Cengage Learning