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The Engine That Runs The Economy A consumer is anyone who buys or uses products Consumer Economics is the study of the role consumers play in an economic system “Customer is always right!” If a company does not satisfy your needs you can go take your business somewhere else. You choose where to get the products you want. Values-Your principles- the standards by which you live your life Goals- The things you want to accomplish in your life Needs- Things you can not live without Wants- Things you would like to have but can live without Life Values: The principles that are most important to you in life Work Values: Principles that are important to you at work Cultural Values: Principles that are important to you because of 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 WHERE you live. Values are NOT constant. They change through out you life as you learn and grow. Different people have different values!!! Goals come from you values, needs, wants and your hopes and dreams. Example: I hope one of your goals is to graduate from high school!! Most things in your life change as you age. Your goals and values will change. This is part of the LIFE CYCLE Long-term goals: things that you want to achieve over a period of years during your lifespan (from birth to death) Life-Span goals: long-term goals that you want to reach during your life. Short-term goals: things that you want to accomplish with in a year What about the things that you have to give up? Opportunity cost: The value of your next best alternative whenever you make a choice. Things may not “cost” the same to all people. Differs based on values A rational buying decision is a choice made in a n organized logical matter. Choices made in this way will most likely fulfill needs or wants. To make a rational buying decision you will use the Decision Making Process Specify: Identify the need or want that you are trying to fulfill and determine your goals. Search: Plan specific steps to gather information Sift: Look at all you options. Look at opportunity cost. Select: Make a choice and act on it. Study: Evaluate the results. An Economic System is the way a nation uses resources to produce goods and services. The creation of goods and services is known as Production. Resources are the things that are used to create other goods and services. Human resources: Skills, training and abilities that people have to complete tasks that result in the production of goods and services Nonhuman resources: Raw materials, tools, and manufactured products, such as oil, tractors and lumber, that are used to make goods and services. The study of how economic systems work. 4 types: Traditional economy Command economy Market economy Mixed economy In a Traditional Economy, the ways to produce products are passed from one generation to the next. Parents teach children how to produce goods and services. In a command economy the government owned most of the resources and made most of the economic decisions. This is the primary economic system. Under a market economy, people rather than government, own the resources and run the business. The purpose of this type of economy is to earn a profit. Profit = Price - Cost This is the United States! We are a mixture of Market and Command… WHY? Scarcity: Is the situation in which consumers’ wants are greater than the resources available to satisfy those wants. Every society must decide how to allocate the scarce resources These choices create the market forces of supply and demand. Demand is the quantity of a good or service that consumers are willing and able to buy at various prices during a given period of time. Law of Demand says that consumers will demand more of a product at a lower price than at a higher price. When the relationship between price and quantity demanded is shown on a graph it is called the demand curve. Supply is the quantity of a product that producers are willing and able to make available for sale at various prices over a given period of time. Law of Supply says that 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. The relationship between price and quantity supplied, shown on a graph is the supply curve. As the price goes up, producers will supply more of that product for sale. The equilibrium price for a product is the price at which the quantity supplied exactly equals the quantity demanded. 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. Surplus results when the supply exceeds the demand When prices come down the consumer will buy more. However, the supplier is not willing to supply more at the lower price. This creates a shortage. Prices provide information that influences a market economy. When there is price competition there are 3 choices Lower the prices Convince customers to pay the higher price Stop offering the product for sale The main reason to run a business is to earn a profit. Companies can increase profits in 3 ways: Reduce Cost Change Price Increase Quantity Sold Competition is the contest among sellers to win customers. This exists when several companies offer similar products for sale. Competition forces businesses to serve consumers 1. Sell products consumers want to buy!! 2. Sell products at a price consumers are willing to pay!! 3. Take in more money from sales than the company spends to produce the products Brand Advertising This type of advertising causes you to remember a particular brand name Usually done through Jingles and Slogans Old jingle New Pepsi Jingle Informative Advertising Designed to influence you to buy a product by educating you about the products benefits. Often used for technical sales such as computers or automobiles Google Ad Comparative Advertising Tries to win your favor by comparing its products to the qualities of other competing produces. Often helps you learn the best qualities about a certain product. Coke vs. Pepsi Defensive Advertising Used to counter attacks from comparative ads. Trying to prove other claims wrong PC Defensive Ad Persuasive Advertising Designed to appeal to your emotions to influence you to buy, but does not provide much useful information. Plays on “heart strings” or “Image” http://Audi Commercial Puffery Is innocent exaggeration. This IS LEGAL Factually Wrong ILLEGAL!! Top ten of 2009 Top ten of 2008 Informative / Persuasive? Defensive Advertising? I am a PC: Not alone! Evian
