CHAPTER 3AMERICAN FREE

ENTERPRISEWhat’s your role?

KEY CHARACTERISTICS OF FREE ENTERPRISE:

Profit Motive Open Opportunity- everyone can

compete in the market place Legal Equality- everyone has the same

legal rights Private Property- right to own and make

decision about your property Freedom to buy and sell what they want

ROLE OF THE CONSUMER

ECONOMICS SUGGEST THESE %S WHEN TRYING TO GET OUT OF DEBT AND MANAGING YOUR MONEY WISELY.

BUYING PRINCIPALS AND STRATEGIESGathering product information before making a purchase

Read reviews of different brands and models

Conduct research on the internet Seek advice from family and

friends Visit stores to compare prices

and quality Look at brochures and catalogs

OPPORTUNITY COSTRational Choice- the alternative that has the greatest perceived value

Involves choosing the best quality item that is the least expensive from comparable-quality products.

Involves the greatest perceived value

Each person’s value system for what he spends is different.

Example- Running shoes

BUYING PRINCIPLES AND STRATEGIESADVERTISINGThe goal of advertising is to win the customer dollar and advertisers are willing to spend millions of dollars to attract your attention.

Competitive advertising- attempts to persuade consumers that a product is different from and better than their competitors.

Informative advertising- provides useful information about a product

Bait and switch- a type of false advertising (advertise a very low price and talk them into higher price items.)

COMPARISON SHOPPINGGetting information on the types and prices of products available from different stores or companies.

CamelBak M.U.L.E 100 oz

$100

Camelbak Tycoon 100 oz. Hydration Pack

$74.95

Regatta Adventure Tech 10L Hydro

Pack330oz $26.95

COMPARISON SHOPPING CONTINUED . . . Consider the following when making a purchase:

Price

Warranty- the promise made by the manufacturer to repair or replace the product if it is faulty.

Brand name or Generic?

CONSUMERISM A MOVEMENT THAT STARTED IN 1960’S TO EDUCATED BUYERS ABOUT PURCHASES THEY MAKE AND DEMAND BETTER AND SAFER PRODUCTSConsumer Rights

Right to safety-protection against dangerous goods

Right to be informed-against fraud and to make reasonable choices

Right to choose- competitive markets- no monopolies

Right to be heard-consumer will be listened to

Right to redress- payment to you for financial or physical damages caused by their products

HOW IS GOVERNMENT INVOLVED IN YOUR EVERYDAY LIFE?

Transportation Education

Product safety Worker safety

Taxation

A FEW WAYS GOVERNMENT INTERVENES: Food and Drug Administration Federal Reserve system Federal Trade commission National Labor Relations Board Environmental Protection agency Occupational Safety and Health

Administration

Merit Good Society considers these desirable by

government leaders- museums, ballets, etc

Government may subsidize these goods Demerit Good- society considers these

undesirable- tobacco, alcohol, gamblingGovernment taxes and regulates demerit

goods“Sin Taxes”

PUBLIC GOODS- SPECIAL TYPE OF GOODS OR SERVICES THAT GOVERNMENT SUPPLIES TO ITS CITIZENS AT THE SAME TIME WITHOUT REDUCING THE BENEFIT EACH PERSON RECEIVES.

DO YOU THINK YOU HAVE A RESPONSIBILITYTO HELP THOSE LESS FORTUNATE THAN YOU?

Income redistribution- govt. activity that takes money from some ,through taxes, to help citizens in need.

Tax dollars are used to subsidize 2 categories of assistance

1. Social-Insurance Programs2. Public Assistance Programs

SOCIAL-INSURANCE PROGRAMS

Programs that pay benefits to retired and disabled workers, their families and the unemployed.

Examples:Social SecurityMedicareWorker’s compensationUnemployment insurance

A portion of your pay goes to these programs.

PUBLIC-ASSISTANCE PROGRAMS Same as Welfare Helps people based on need,

regardless of age. You don’t have to pay taxes to

benefit Examples-WelfareMedicaidSupplemental Nutrition Assistance Program (SNAP), (Food Stamps)