1. Economics & the Consumer
Chapter 19
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2. Chapter Objectives:
After completing this chapter, you should be able to:
Define a free-enterprise system and identify producers & consumers
Describe the marketplace & explain why prices go up and down
Explain three factors to consider when measuring the economy’s health
Identify ways to make wise shopping decisions
Identify common types of fraud & ways to protect yourself as a consumer
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3. Economics (19.1)
Field of study that tries to explain how people produce, distribute, & use goods and services
The way people participate in these activities depends on the economic system of the country where they live
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4. Economic system
A country’s way of using resources to provide goods & services that its people want & need
Types of Economic systems
Traditional – Traditions and customs
Command – Government run
Market – Buyers & sellers make decisions
Mixed - Some characteristics of all three
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5. Free-Enterprise System
Individuals or business may buy & sell and set prices with little government interference.
Government role: create laws, set safety standards, regulate prices & wages, & protect consumers
Marketplace- where buying & selling occur
First…the U.S. uses a free enterprise system.
3. face-to-face, on line, over the phone, etc.
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6. Price fluctuations Supply & demand Production costs Competition
When supply > demand (prices decrease)
When demand > supply (prices rise)
Production costs
When they rise, the price goes up too
They must sell their products at a higher price than it costs to produce them
Competition
High competition = low prices
No competition = high prices
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7. Business Cycle Prosperity Recession. Depression Recovery
Period of economic growth…low unemployment & high output
Recession.
Unemployment rises, fewer goods & services are produced, consumer spending falls
Depression
Long recession. Very low spending & very high unemployment. Poverty rises
Recovery
Period of renewed growth in economy
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8. Measuring the economy Gross domestic product (GDP)
Total dollar value of all goods & services produced in the United States
Main indicator of the condition of our economy
Consumer price index (CPI)
Measures changes in the prices of consumers goods & services (Inflation)
Unemployment
Percentage of labor force that is without work but actively seeking employment
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9. Smart shopping (19.2) Pay attention to quality
Plan timing of your purchases (if possible)
Take advantage of discount stores
Consider buying used or second-hand goods
Explore online options
you’ll save money in the long run by buying well-made items
You’ll find more bargains at certain times of the year
5. Online prices can be surprisingly low & more convenient too
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10. Buyer Beware! Consumer fraud Fraudulent advertising (bait and switch)
Dishonest business practices used by people who are trying to trick or cheat you
Fraudulent advertising (bait and switch)
Auto repair fraud
Phony prize notifications
2. A retailer advertises a bargain (bait) to lure people in the store. When the customers arrive, the store is “out” of the item. A salesperson tries to sell a similar product at a much higher price. This is the (switch)
3. Dishonest auto mechanics try to charge you much more than the estimated cost of a repair.
4. don’t provide credit card or checking account # info for willing “grand prizes.”
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11. Groups that protect consumers
Federal Trade Commission (FTC)
Enforces rules about labeling, advertising, & warranties
Warranty – guarantee that a product meets certain quality standards
Consumer Product Safety Commission (CPSC)
Helps protect the public against dangerous products.
Food & Drug Administration (FDA)
Enforces laws about quality & labeling of food, drugs, & medical devices
1. Thanks to the FTC, the labels in your clothes provide care instructions
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