Role of a Consumer in a Free Enterprise System Mrs. Wilson Career & College Prep Rocky Point High School

Quick Review Our economy is which of the following? Command Traditional Market/Capitalism What are producers? What are consumers? Complete this sentence… Everyone is a ______________. (producer/consumer)

Quick Review What is the basic economic problem referred to that means that consumer’s wants are unlimited and that resources are limited? What is the quantity of goods and services that producers are willing and able to provide?

Quick Review What is the willingness and ability of consumers to purchase goods and services at certain prices? What does the term “equilibrium price” mean?

Utility This is the term economists use to describe the satisfaction consumers receive from using or owning a good or service For example, owning in-line skates may bring a particular consumer twice as many “utils” as owning a bicycle

Consumer Power The consumer has the ultimate power in a free enterprise system Buying decisions direct the production of goods and services Determine what will be produced and at what price When buying, they are casting $$ votes for its continued production

Producer Power They ALSO have power in a free enterprise system They use advertising and other marketing strategies to induce consumers to want products Advertising Communication of product information through mass media to increase demand Informative and give facts Can be false and misleading

Parts of a Free Enterprise System INFORMED CONSUMERS COMPETITION PURCHASING POWER

Competition Rivalry among sellers Occurs when there is more than one seller of a good or service Monopoly only one seller Price Fixing is an illegal agreement among competitors to sell a good or product at a set price

Competition Healthy competition keeps prices down Sometimes the government will grant a monopoly One power company (LIPA/CON ED) to serve a geographic area Governments regulate to avoid “gouging”

Questions… Do you buy American products first? Why or why not? Do you agree that consumers have the right to purchase the best value, regardless of who makes the product?

Purchasing Power The value of money, measured in the amount of goods or services it can buy Purchasing power goes up & down with the economy

Purchasing Power Inflation Recession When prices are generally rising in the economy, purchasing power decreases Recession When production, employment and income are declining. People lose their jobs cannot buy as many goods. Overall loss to our purchasing power in the economy

Purchasing Power Transfer payments Government shifts purchasing power my making these payments Government grants to some citizens paid with money collected from other citizens Can you name some?

Informed Consumers You should know your rights and responsibilities in the marketplace When consumers make wise decisions, they system works to weed out inferior products and keep prices at an acceptable level When consumers do not act responsibly, prices increase

Question… What would you do if you received a pay raise or earned an increase in allowance ?

Three Basic Economic Questions What will be produced? What the people want By whom will it be produced? Entrepreneurs For whom will it be produced? People who can afford it

Review… Tell me one thing that you remember from today’s presentation on our economy Don’t forget to raise your hand!