Introduction to Consumer Education

Rationale for this course Why are we taking Consumer

Education?

Required by the State of Illinois for graduation

One of only 13 states!

In general, Americans are bad with money.

Spend too much, save too little

Credit card debt….we want it now!

We will learn how to control our money, not let our money control us!

Our Goals for Consumer Ed

1. Basic knowledge about how the economy works.

2. Responsible consumers 3. Knowledgeable/ informed

consumers 4. Understand the rights and

responsibilities of consumers. 5. Wise savers and investors 6. Good financial decision-making

What is…

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services.

The study of $$$

Classic economics is concerned with the study of governments and businesses.

Consumer Economics Consumer

economics is a branch of economics.

It is mainly concerned with the analysis of the behavior of consumers, families, or individuals.

In this course we will focus on Consumer Economics…

Budgeting

Banking (Savings and Checking)

Credit and Loans

Taxes

Investments

Finding a Job

Advertising

What is an Economic System?

The way in which a nation uses its economic resources to satisfy peoples wants and needs.

Each economic system answers the 3 Basic Questions:

1. What should be produced?

2. How should it be produced?

3. For whom should it be produced?

Types of Economic Systems

The 4 major economic systems all answer the 3 Basic Questions differently.

There are 4 major types of economic systems: Traditional

Command

Market

Mixed

Traditional Economy

3 Questions are answered according to tradition, customs, and beliefs.

Ideas, skills, and rules are handed down from generation to generation.

Very basic tools, simple, inefficient production.

Examples: Inuit of NA, Kalahari of Africa.

Command Economy aka Communism In a command economy, the

3 Questions are answered by the government.

Individual business owners have little say in what is produced, how much is made, etc.

The government decides what is made and how goods are distributed.

Examples: North Korea, China, former Soviet Union

Market Economy aka Capitalism

3 Questions are answered by individuals/ business owners with no government intervention.

The goal is to make a profit (profit=price-cost)

Prices determine themselves based on supply and demand. Adam Smith’s Invisible Hand

+ = Many choices, potential for profit, creativity is rewarded, competition means lower prices, better quality.

- = Those unable to work may suffer, owners may take advantage of workers, uneven distro of wealth

Mixed Economy

A mix of a market economy and a command economy….this is known as a mixed economy.

Most countries have a mixed economy, including the U.S.

Individual decision making is combined with government involvement and rules.

Ex. Nike can choose what kind of shoe to

make and how much to sell it for, but must pay employees minimum wage and provide a safe work environment.

Supply and Demand

In a mixed economy, the decision to produce something, as well as it’s price, is based on supply and demand.

Supply- what producers are willing to produce based on available resources. If too much is produced, producer loses money.

If too little is produced, produced doesn’t make enough $

Demand- what consumers are willing to buy at a certain price. If price is too high, consumers won’t buy.

Consumers want lowest price possible, but if price is too low, producers won’t make enough $.

Equilibrium determines production and price. Where producer and consumer meet!

Demand Schedules

Supply/ Demand Curve

Supply Curve- the amount producers are willing to produce

Demand Curve- the amount consumers are willing to buy

Equilibrium (the most profitable)

Scarcity

Humans have unlimited wants and needs.

However, resources are finite (limited) Ex. Diamonds, food, water

Therefore, most goods and services are said to be scarce (not enough resources to satisfy all wants and needs)

Trade-offs (alternatives) are considered when goods are scarce.

Wants and Needs Since most of us don’t have an

unlimited supply of $, consumers have to decide whether a certain item is a want or a need.

Need- something you need in order to survive. Food, shelter, clothing, health care,

transportation

Want- something you would like to have, but don’t need. Fine dining, mansion, Gucci, BMW

Want or Need?