Why are consumer skills vital to participating in the economy? Ch. 20-23

decision making process (paced) Problem-Define the problem Alternatives-List alternative solutions and the costs and benefits of each Criteria-Develop a list of criteria that will be needed solve the problem Evaluate-Evaluate each alternative based on the criteria Decide-Choose the best solution based on your evaluation of each alternative

Planning a major purchase Ask yourself the following: Why do I want this product? How long will this product last? What substitutes are available and at what cost? By postponing this purchase, is it likely that I will choose to not buy it later? What types of additional costs are involved, such as supplies, maintenance, insurance, and financial risks? What is opportunity cost of this purchase? What is the total cost of this product(including interest, etc)?

Factors that influence spending Personal Resources Time, money, energy, skills and abilities, credit Position in life Age, marital status, gender, employment status Customs, background, religion Values and goals Outside factors The economy, technological advances, the environment, social pressures

Marketing Strategies that can influence your purchase decisions Advertising Goal is to create a desire to purchase a product or service Pricing Psychological pricing: strategies that help buyers believe they are getting a bargain Odd number pricing- portrays a bargain image multiple pricing-makes it more likely that you will buy more Sales Loss leader-item priced at or below cost to pull you into the store hoping you will buy other products Promotional techniques Displays, contests and games, coupons, frequent buyer cards, packaging sampling, and micromarketing

Housing decisions Renting Buying Advantages Disadvantages Advantages Mobility Convenience Minimal responsibility Social life Lower living expenses Disadvantages Noise Lack of privacy Small quarters Lack of storage Lack of parking Advantages Equity increases Tax savings Control over you property Pets More personal freedom Disadvantages Increased costs Down payment Lack of mobility Long term investment Renting Buying * equity: the difference between the market value of property and the amount owed on it

Costs of buying a home Down Payment Mortgage costs Closing Costs 5-20% of the purchase price Mortgage costs Points-1 point equals 1 percent on the loan amount, paid at the time of closing Closing Costs Usually $3,000-$5,000 Include: title search and title insurance, loan fees, credit report fees, paperwork preparation fees, recording fees, some portion of taxes and insurance Installation fees Costs to turn on electricity, phone, etc.

Car buying process Identify your needs and wants Determine what you can afford Identify and research your choices Decide whether to buy new or used Get credit pre-approval Research insurance rates Search for available vehicles Test drive each vehicle Check the history on a used vehicle Get the vehicle checked mechanically Determine a fair price Negotiate the price Determine if you want dealer add-ons

Cost of operating a car Gas and oil Depreciation Change your oil every 3,000 miles or 3 months(whichever comes first) Depreciation Decline in value of property due to normal wear and tear Registration and title Registration and sales tax at purchase License fee and emissions testing every two years Maintenance and Repairs Tune-ups, brakes, etc. Accessories

Insurance Risk in insurance is the chance of financial loss from the perils to people or property Insurance= method of spreading individual risk among a large group of people to make losses more affordable for all Policy=a written contract for insurance Premium = Fee for insurance (paid at regular intervals) Policy holder = the owner of the insurance policy Insurer = the insurance company Indemnification means to put the policyholder back into the same financial position they were in prior to the incident, not to better it

Insurance risks Personal risks-the chances of loss involving your income and standard of living Property risks-the chances of loss or harm to personal or real property Liability risks-the chances of loss that may occur when our errors or inappropriate actions result in bodily injury to someone else.

Insurance risks Personal risks-the chances of loss involving your income and standard of living Death Injury - cannot work Medical condition Disabled

Insurance risks Property risks-the chances of loss or harm to personal or real property Fire Theft

Insurance risks Liability risks-the chances of loss that may occur when our errors or inappropriate actions result in bodily injury to someone else. Negligence or inappropriate action resulted in: Property damage Personal injury Liability= responsibility for loss due to your own actions and negligence.