Transcript 08ETT Chapter 03

Chapter Introduction
Section 1: Consumption,
Income, and
Decision Making
Section 2: Buying Principles
and Strategies
Section 3: Consumerism
Visual Summary
Buyers and sellers voluntarily
interact in markets, and market
prices are set by the interaction of
demand and supply.
Think about how you spend your
money on things such as
transportation, entertainment,
food, and clothing. How do you
make these economic choices?
In this chapter, read to learn
about what it means to be a
consumer and make rational
consumer choices.
Section Preview
In this section, you will learn about factors
that influence you as a consumer and how
to make rational consumer decisions.
How much of a role does shopping
play in your life?
A. A huge role
B. A moderate role
0%
C
A
0%
A. A
B. B
C.0%C
B
C. A small role
Disposable and Discretionary Income
After people pay taxes, their remaining
income may be saved or spent on
essential or nonessential items.
Disposable and Discretionary Income
(cont.)
• Consumers play an important role in the
economic system.
• Your ability to consume depends on
available income and if you choose to
spend.
Disposable and Discretionary Income
(cont.)
• Two types of income:
– Disposable
– Discretionary
• Education, occupation, experience,
location, and health can all make
differences in a person’s earning power
and consumption.
View: Earning Power
Food and housing would fall under
which type of income?
A. Disposable
B. Discretionary
A. A
B. B
0%
B
A
0%
Decision Making as a Consumer
Consumer decisions involve
comparing available alternatives.
Decision Making as a Consumer (cont.)
• After you have decided to make a
purchase, at least two scarce resources
are involved—income and time.
• Almost all the steps in consumer decision
making, like the choices represented in the
graph, involve an opportunity cost.
View: Consumer Spending
Decision Making as a Consumer (cont.)
• When you make consumer decisions
based on opportunity cost, you engage in
rational choice. A rational choice is one
that generates the greatest perceived
value for any given expenditure.
Section Preview
In this section, you will learn the three basic
buying principles that will help you to make
effective consumer choices.
Do you feel that you have enough
time to make wise shopping
decisions?
A. Always
B. Sometimes
0%
C
A
0%
B
C. Never
A. A
B. B
C.0%C
Gathering Information
Consumers should be well informed
before making a purchase.
Gathering Information (cont.)
• Shopping tips:
– You should obtain only as much
information as is worthwhile.
– Ask salespeople for accurate
information.
Gathering Information (cont.)
– Use a standard search engine on the
Internet, and visit various sites in order
to compare different information.
– Read reviews other people have written
about different brands and models of the
product.
Is the Internet helpful to you when it
comes to shopping?
A. Most definitely
B. Some of the time
0%
C
A
0%
A. A
B. B
C.0%C
B
C. Never
Using Advertising Wisely
Consumers should carefully consider
the claims of advertisers.
Using Advertising Wisely (cont.)
• Two types of advertising:
– Competitive
– Informative
Using Advertising Wisely (cont.)
• Beware of false advertising like the bait
and switch which is deceptive and illegal.
Which type of advertisement
concentrates on appealing to
peoples’ emotions?
A. Competitive
B. Informative
A. A
B. B
0%
B
A
0%
Comparison Shopping
The best price for an item can be found
through comparison shopping.
Comparison Shopping (cont.)
• It is generally worthwhile to do
comparison shopping, although it can be
time consuming.
Comparison Shopping (cont.)
• Tips:
– Read newspaper advertisements
– Make telephone calls
– Browse the Web
– Visit different stores
– Talk with friends
Comparison Shopping (cont.)
• Don’t forget to find out which stores offer
the best warranty if a product is found to
be faulty.
• Consumers sometimes choose between a
brand name and a generic product.
• Brand name is a word, picture, or logo on
a product that helps consumers distinguish
it from similar products.
Comparison Shopping (cont.)
• A generic brand has a general name for a
product and it is difficult to know who
manufactured the product.
In general, how big do you think the
difference is between brand name
and generic products?
A. A huge difference
B. A moderate difference
C. A small difference
D. None at all
0%
A
A.
B.
C.
0%
D.
B
A
B
C
0%
D
C
0%
D
Section Preview
In this section, you will learn about your
rights and responsibilities as a consumer.
Are you aware of your consumer
rights and responsibilities?
A. Yes
B. Somewhat
0%
C
A
0%
A. A
B. B
C.0%C
B
C. Not at all
Consumer Rights
Legislative protection of consumer
rights has grown steadily since the
1960s.
Consumer Rights (cont.)
• Consumerism is a movement that started in
the 1960s to educate buyers about the
purchases they make and to demand better
and safer products from manufacturers.
Consumer Rights (cont.)
• In 1962, President John F. Kennedy
outlined four consumer rights:
– The right to safety.
– The right to be informed.
– The right to choose.
– The right to be heard.
Consumer Rights (cont.)
• President Richard Nixon added the fifth
right:
– The right to redress.
Which right do you think is most
important to you as a consumer?
A. Safety
B. Information
B
A
0%
0%
E
E. Redress
A
B
C0%
D
E
D
D. Voicing your opinion
A.
B.
0% C.
0%
D.
E.
C
C. Choice
Consumer Responsibilities
Consumers can resolve problems most
effectively by accepting certain
responsibilities.
Consumer Responsibilities (cont.)
• If a product or service is faulty, it is the
consumer’s responsibility to initiate the
problem-solving process.
View: The Consumer’s Role
Consumer Responsibilities (cont.)
• If you choose to shop online, make sure
you:
– Buy from a reputable, trustworthy
source.
– Read any confidentiality and disclosure
agreements.
– Never enter your personal and financial
information into a link that was sent to
you by a business or company.
Consumer Responsibilities (cont.)
• Consumers should also exhibit ethical
behavior by respecting rights of producers
and sellers.
Do you agree with your
responsibilities as a consumer?
A. Definitely
B. Somewhat
0%
C
A
0%
A. A
B. B
C.0%C
B
C. Not really
Consumer decision making deals with
consumers’ choices about how to spend their
income.
Before making purchases, especially of bigticket items, consumers should gather
information and compare products from
different sources.
In the United States, consumer rights are
protected by congressional legislation. Along
with these rights, though, come consumer
responsibilities. Savvy consumers are
aware of both and seek a balance between
the two.
consumer: any person or group that
buys or uses goods and services to
satisfy personal needs and wants
disposable income: income
remaining for a person to spend or
save after all taxes have been paid
discretionary income: money
income a person has left to spend on
extras after necessities have been
bought
rational choice: choosing the
alternative that has the greatest value
from among comparable-quality
products
competitive advertising: advertising
that attempts to persuade consumers
that a product is different from and
superior to any other
informative advertising: advertising
that benefits consumers by providing
useful information about a product
bait and switch: ad that attracts
consumers with a low-priced product,
then tries to sell them a higher-priced
product
comparison shopping: getting
information on the types and prices of
products available from different
stores and companies
warranty: promise made by a
manufacturer or a seller to repair or
replace a product within a certain time
period if it is found to be faulty
brand name: word, picture, or logo
on a product that helps consumers
distinguish it from similar products
generic brand: general name for a
product rather than a specific brand
name given by the manufacturer
consumerism: movement to educate
buyers about the purchases they
make and to demand better and safer
products from manufacturers
ethical behavior: acting in
accordance with moral convictions
about right and wrong
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