2Rationale for this course Why are we taking Consumer Education?Required by the State of Illinois for graduationOne of only 13 states!In general, Americans are bad with money.Spend too much, save too littleCredit card debt….we want it now!We will learn how to control our money, not let our money control us!
3Our Goals for Consumer Ed 1. Basic knowledge about how the economy works.2. Responsible consumers3. Knowledgeable/ informed consumers4. Understand the rights and responsibilities of consumers.5. Wise savers and investors6. Good financial decision-making
6What is… Economics Consumer 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 is a branch of economics.It is mainly concerned with the analysis of the behavior of consumers, families, or individuals.
7In this course we will focus on Consumer Economics… BudgetingBanking (Savings and Checking)Credit and LoansTaxesInvestmentsFinding a JobAdvertising
8What 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?
9Types of Economic Systems The 4 major economic systems all answer the 3 Basic Questions differently.There are 4 major types of economic systems:TraditionalCommandMarketMixed
10Traditional Economy3 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.
11Command 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
12Market 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
13Mixed EconomyA 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.
14Supply 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!
18Scarcity 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.
19Wants 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 need in order to survive.Food, shelter, clothing, health care, transportationWant- something you would like to have, but don’t need.Fine dining, mansion, Gucci, BMW