ALL SECTIONS:

Economics Chapter 3: Your Role as a Consumer

Spending Money

Disposable vs. Discretionary Income Disposable= money income after all taxes have been

paid Discretionary= money left after all necessities have

been bought. Money spent on entertainment and luxury items.

Rational Chooice: alternative choice that has the best value Values is subjective

In your notes: What do you look for when purchasing a pair of shoes?

Decision Making as a Consumer

1. First must decide if you are going to buy an item.

2. Next at least 2 scarce resources are involved:

1. Time2. Money

3. Opportunity Cost: the value of your highest alternative choice that you did not make.

Three Basic Buying Principles

Gathering Information The value of your own time is important in this

Using Advertising wisely Competitive Ads: Attempts to prove superiority Usually from established companies Informative Ads: give you information on the product Comparative: compare directly two products Bait and Switch Ads: deceptive

Bait you with a low price, show you the better model on arrival

Comparison Shopping: Gaining info on Brands Generic Names vs. Brand Names

Consumerism

Movement to educate people about the products they buy. Demand better and safer products from manufacturers

Consumer Rights: Gained Steam with the Kennedy Administration in the 1960’s.

- Consumer Bill of Rights1. Right to safety2. Right to be informed3. Right to Choose4. Right to be heard5. Right to Redress

Consumer Responsibilities

Consumer Responsibilities: Educate yourselfIf Producers have regulation, Consumers must act Ethically:

Acting morally when it comes to taking part in the market

Consumer Fraud and Scams

I. Avoiding ScamsA. “If it is too good to be true, it probably is!”B. “There is nothing free in life!”C. Read all contractsD. Get everything in writingE. Never send money to win a prizeF. Contact the Attorney Generals Office (Consumer Protections Agency)

Types of Scams

I. Bait and Switch- Drawn to the store because of ad, then salesman sells you a more expensive product. - this is against the law

II. Work at Home Scheme- you send money to assemble products then company pays to back when you finish the job

III. Paying to Win- You have one a product or trip, but requests you send money or give credit card number, to cover shipping and handling.

Types of Fraud

IV. Home Solicitation Sales- hard sell the elderly- salesmen must be licensed

V. Negative Option Clubs- club sends you books or CD’s and credits your account if you don’t send them back on time.

VI. Charitable Solicitations- phony charities

VII.Nigerian Scam