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Introduction to Consumer Education. Rationale for this course  Why are we taking Consumer Education?  Required by the State of Illinois for graduation.

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Presentation on theme: "Introduction to Consumer Education. Rationale for this course  Why are we taking Consumer Education?  Required by the State of Illinois for graduation."— Presentation transcript:

1 Introduction to Consumer Education

2 Rationale for this course  Why are we taking Consumer Education?  Required by the State of Illinois for graduation  One of only 13 states!  In general, Americans are bad with money.  Spend too much, save too little  Credit card debt….we want it now!  We will learn how to control our money, not let our money control us!

3 Our Goals for Consumer Ed  1. Basic knowledge about how the economy works.  2. Responsible consumers  3. Knowledgeable/ informed consumers  4. Understand the rights and responsibilities of consumers.  5. Wise savers and investors  6. Good financial decision-making

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6 What is… Economics  Economics is the social science that analyzes the production, distribution, and consumption of goods and services.  The study of $$$  Classic economics is concerned with the study of governments and businesses. Consumer Economics  Consumer economics is a branch of economics.  It is mainly concerned with the analysis of the behavior of consumers, families, or individuals.

7 In this course we will focus on Consumer Economics…  Budgeting  Banking (Savings and Checking)  Credit and Loans  Taxes  Investments  Finding a Job  Advertising

8 What 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?

9 Types of Economic Systems  The 4 major economic systems all answer the 3 Basic Questions differently.  There are 4 major types of economic systems:  Traditional  Command  Market  Mixed

10 Traditional Economy  3 Questions are answered according to tradition, customs, and beliefs.  Ideas, skills, and rules are handed down from generation to generation.  Very basic tools, simple, inefficient production.  Examples: Inuit of NA, Kalahari of Africa.

11 Command Economy aka Communism  In 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 decides what is made and how goods are distributed.  Examples: North Korea, China, former Soviet Union

12 Market Economy aka Capitalism  3 Questions are answered by individuals/ business owners with no government intervention.  The goal is to make a profit (profit=price-cost)  Prices determine themselves based on supply and demand.  Adam Smith’s Invisible Hand  + = 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

13 Mixed Economy  A mix of a market economy and a command economy….this is known as a mixed economy.  Most countries have a mixed economy, including the U.S.  Individual decision making is combined with government involvement and rules.  Ex.  Nike can choose what kind of shoe to make and how much to sell it for, but must pay employees minimum wage and provide a safe work environment.

14 Supply and Demand  In 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!

15 Demand Schedules

16 Supply/ Demand Curve Supply Curve- the amount producers are willing to produce Demand Curve- the amount consumers are willing to buy

17 Equilibrium (the most profitable)

18 Scarcity  Humans have unlimited wants and needs.  However, resources are finite (limited)  Ex. Diamonds, food, water  Therefore, 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.

19 Wants and Needs  Since 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 need in order to survive.  Food, shelter, clothing, health care, transportation  Want - something you would like to have, but don’t need.  Fine dining, mansion, Gucci, BMW

20 Want or Need?


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