The Engine That Runs The Economy

 A consumer is anyone who buys or uses products  Consumer Economics is the study of the role consumers play in an economic system

 “Customer is always right!”  If a company does not satisfy your needs you can go take your business somewhere else.  You choose where to get the products you want.

 Values- Your principles- the standards by which you live your life  Goals- The things you want to accomplish in your life  Needs- Things you can not live without  Wants- Things you would like to have but can live without

 Life Values:  The principles that are most important to you in life  Work Values:  Principles that are important to you at work  Cultural Values:  Principles that are important to you because of your ethnic heritage or religion

 Social Values  Principles that are important to you because of the community in which you live.  Demographic Values  Principles that are important to you because of WHERE you live.

 Values are NOT constant. They change through out you life as you learn and grow.  Different people have different values!!!

 Goals come from you values, needs, wants and your hopes and dreams.  Example: I hope one of your goals is to graduate from high school!!

 Most things in your life change as you age.  Your goals and values will change.  This is part of the LIFE CYCLE

 Long-term goals: things that you want to achieve over a period of years during your life- span (from birth to death)  Life-Span goals: long-term goals that you want to reach during your life.  Short-term goals: things that you want to accomplish with in a year

 What about the things that you have to give up?  Opportunity cost: The value of your next best alternative whenever you make a choice.  Things may not “cost” the same to all people.  Differs based on values

 A rational buying decision is a choice made in a n organized logical matter.  Choices made in this way will most likely fulfill needs or wants.  To make a rational buying decision you will use the Decision Making Process

 Specify:  Identify the need or want that you are trying to fulfill and determine your goals.

 Search:  Plan specific steps to gather information  Sift:  Look at all you options. Look at opportunity cost.  Select:  Make a choice and act on it.  Study:  Evaluate the results.

 An Economic System is the way a nation uses resources to produce goods and services.  The creation of goods and services is known as Production.  Resources are the things that are used to create other goods and services.

 Human resources:  Skills, training and abilities that people have to complete tasks that result in the production of goods and services  Nonhuman resources:  Raw materials, tools, and manufactured products, such as oil, tractors and lumber, that are used to make goods and services.

 The study of how economic systems work.  4 types:  Traditional economy  Command economy  Market economy  Mixed economy

 In a Traditional Economy, the ways to produce products are passed from one generation to the next. Parents teach children how to produce goods and services.

 In a command economy the government owned most of the resources and made most of the economic decisions.

 This is the primary economic system.  Under a market economy, people rather than government, own the resources and run the business.  The purpose of this type of economy is to earn a profit.  Profit = Price - Cost

 This is the United States!  We are a mixture of Market and Command…  WHY?

 Scarcity:  Is the situation in which consumers’ wants are greater than the resources available to satisfy those wants.  Every society must decide how to allocate the scarce resources  These choices create the market forces of supply and demand.

 Demand is the quantity of a good or service that consumers are willing and able to buy at various prices during a given period of time.  Law of Demand says that consumers will demand more of a product at a lower price than at a higher price.

 When the relationship between price and quantity demanded is shown on a graph it is called the demand curve.

 Supply is the quantity of a product that producers are willing and able to make available for sale at various prices over a given period of time.  Law of Supply says that producers are willing to offer more of a product for sale at a higher price than at a lower price. As the price rises, the quantity supplied increases.

 The relationship between price and quantity supplied, shown on a graph is the supply curve.  As the price goes up, producers will supply more of that product for sale.

 The equilibrium price for a product is the price at which the quantity supplied exactly equals the quantity demanded.  At the equilibrium price, consumers are willing and able to buy the same amount of the product as producers are willing and able to supply.

 Surplus results when the supply exceeds the demand  When prices come down the consumer will buy more. However, the supplier is not willing to supply more at the lower price. This creates a shortage.

 Prices provide information that influences a market economy.  When there is price competition there are 3 choices  Lower the prices  Convince customers to pay the higher price  Stop offering the product for sale

 The main reason to run a business is to earn a profit.  Companies can increase profits in 3 ways:  Reduce Cost  Change Price  Increase Quantity Sold

 Competition is the contest among sellers to win customers.  This exists when several companies offer similar products for sale.  Competition forces businesses to serve consumers

1. Sell products consumers want to buy!! 2. Sell products at a price consumers are willing to pay!! 3. Take in more money from sales than the company spends to produce the products

 Brand Advertising  This type of advertising causes you to remember a particular brand name  Usually done through Jingles and Slogans  Old jingle Old jingle  New Pepsi Jingle New Pepsi Jingle

 Informative Advertising  Designed to influence you to buy a product by educating you about the products benefits.  Often used for technical sales such as computers or automobiles  Google Ad Google Ad

 Comparative Advertising  Tries to win your favor by comparing its products to the qualities of other competing produces.  Often helps you learn the best qualities about a certain product.  Coke vs. Pepsi Coke vs. Pepsi

 Defensive Advertising  Used to counter attacks from comparative ads.  Trying to prove other claims wrong  PC Defensive Ad PC Defensive Ad

 Persuasive Advertising  Designed to appeal to your emotions to influence you to buy, but does not provide much useful information.  Plays on “heart strings” or “Image”  CommercialAudi Commercial

 Puffery  Is innocent exaggeration. This IS LEGAL  Factually Wrong  ILLEGAL!!

 Top ten of 2009 Top ten of 2009  Top ten of 2008 Top ten of 2008  Informative / Persuasive? Informative / Persuasive?  Defensive Advertising? Defensive Advertising?  I am a PC: Not alone! I am a PC: Not alone!  Evian Evian