1. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3 LESSON 3.3 Deception and Fraud Objectives: By the end of class, students will be able to: ► Explain the meaning of deception and describe how consumers may be harmed by this practice. ► Identify common types of fraud and explain how consumers may protect themselves against it. © 2010 South-Western, Cengage Learning Slide 1

2. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3 KEY TERMS  trading up  loss leader  fraud  bait and switch  pyramid scheme © 2010 South-Western, Cengage Learning Slide 2

3. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3 Deception ► Trading up- The practice of pressuring consumers to buy a more expensive product than they intended ► Sale price – A sale is only a sale if the price is below the regular price. Sale prices can be deceptive. ► Suggested retail price – They are sometimes higher than any retailer expects to actually get for the product. © 2010 South-Western, Cengage Learning Slide 3

4. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3 Deception ► Loss leader- A product priced below cost to attract customers to the store ► Bait and Switch- The practice of “baiting” consumers with an advertised but non- existent bargain and then “switching” them to a more expensive product when they arrive at the store ► Pyramid Scheme- A type of financial fraud in which people pay to join an organization in exchange for the right to sell membership to other people © 2010 South-Western, Cengage Learning Slide 4

5. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3 Fraud ► Fraud: deliberate deception, designed to secure unfair or unlawful gain. ► A statement is fraudulent if it meets these two conditions: ► The person who made the statement must know it is false. ► The purpose of the statement must be to cause others to give up property that has value, such as money. © 2010 South-Western, Cengage Learning Slide 5

6. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3 Examples of Fraud ► Bait and switch ► Pyramid schemes ► Internet and telephone fraud – advantageous to con- artists because you can’t see them. Are they legitimate? © 2010 South-Western, Cengage Learning Slide 6

7. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3 Internet and Telephone Fraud Watch out for... ► Deal offered seems too good to be true ► Credit card/Social Security number requested to verify identity ► Must buy item to get something else for free ► No written contract or sales agreement is provided ► You “must act now” or offer expires ► No method given to contact the organization ► Information about organization not available from independent sources © 2010 South-Western, Cengage Learning Slide 7

8. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3 The Many Faces of Fraud Examples:  Healthcare products that promise to cure incurable diseases  Home-improvement contractors who want payment before doing any work  Vacation clubs that require money in advance with the promise of inexpensive first-class vacations later  Repair work offered for less than the going rate  Weight-loss programs that promise unrealistic results © 2010 South-Western, Cengage Learning Slide 8

9. ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 3 Student Practice/Application ► Your Task: ► 1. Read pages 101-108 in your Economics textbook. ► 2. Complete Questions 1-9 on Page 108 of your textbook. (Try These) ► Extra Credit: Complete questions 10,12,13 on page 108 of your textbook. *(Think Critically) © 2010 South-Western, Cengage Learning Slide 9