2Rationale for this course Why are we taking Consumer Education?Required by the State of Illinois for graduationIn general, Americans are bad with money.Spend too much, save too littleCredit card debt….we want it now!
3What is…EconomicsConsumer EconomicsEconomics is the social science that analyzes the production, distribution, and consumption of goods and services.Classic economics is concerned with the study of governments and businesses.Consumer economics is a branch of economics.It is mainly concerned with microeconomic analysis behavior in units of consumers, families, or individuals.
4What key topics will we discuss in Consumer Economics? Being an intelligent consumerConsumer rightsCreating a budgetThe job search processPaychecksTaxesBuying a car/ transportationRenting/ purchasing a homeCredit cards and other loans
5What is an Economic System? The way in which a nation uses its economic resources to satisfy peoples wants and needs.Each economic system answers the 3 Basic Questions:1. What should be produced?2. How should it be produced?3. For whom should it be produced?
6Types of Economic Systems The 4 major economic systems all answer the 3 Basic Questions differently.There are 4 major types of economic systems:TraditionalCommandMarketMixed
7Traditional Economy3 Questions are answered according to tradition, customs, and beliefs.Ideas, skills, and rules are handed down from generation to generation.+ = Known expectations, strong fam/ community.- = change/innovation is discouraged, choice is very limited, production is inefficient.Examples: Inuit of NA, Kalahari of Africa.
8Command EconomyIn a command economy, the 3 Questions are answered by the government.Individual business owners have little say in what is produced, how much is made, etc.The government also decides how goods are distributed.+ = Decisions can be made quickly, even distro of $- = lack of incentive to work hard, be creative; also lack of choicesExamples: North Korea, China, former Soviet Union
9Market Economy A market economy is also known as Capitalism. The goal is to make a profit (profit=price-cost)3 Questions are answered by individuals/ business owners with no government intervention.Prices determine themselves based on supply and demand.+ = Many choices, potential for profit, creativity is rewarded, competition means lower prices, better quality.- = Those unable to work may suffer, owners may take advantage of workers, uneven distro of wealth
10Mixed Economy Our economy in the U.S. is not a pure market economy. It is a combination of a market economy and a command economy….this is known as a mixed economy.Most countries have a mixed economy.Individual decision making is combined with government intervention and regulation.For example: Govt. may set the price that utility companies can charge for their product or the government may put regulations on what businesses can or cannot do.
11Supply and DemandIn a mixed economy, the decision to produce something, as well as it’s price, is based on supply and demand.Supply- what producers are willing to produce based on available resources.If too much is produced, producer loses money.If too little is produced, produced doesn’t make enough $Demand- what consumers are willing to buy at a certain price.If price is too high, consumers won’t buy.Consumers want lowest price possible, but if price is too low, producers won’t make enough $.Equilibrium determines production and price.Where producer and consumer meet!
15Scarcity Humans have unlimited wants and needs. However, resources are finite (limited)Ex. Diamonds, food, waterTherefore, most goods and services are said to be scarce (not enough resources to satisfy all wants and needs)Trade-offs (alternatives) are considered when goods are scarce.
16Wants and NeedsSince most of us don’t have an unlimited supply of $, consumers have to decide whether a certain item is a want or a need.Need- something you have to haveFood, shelter, clothing, health care, transportationWant- something you would like to haveFine dining, mansion, Gucci, BMW