Economics Chapter 3: Your
Role as a Consumer
ALL SECTIONS:
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
First must decide if you are going to buy an item.
2. Next at least 2 scarce resources are involved:
1.
1.
2.
Time
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 Rights
1. Right to safety
2. Right to be informed
3. Right to Choose
4. Right to be heard
5. Right to Redress
Consumer Responsibilities
Consumer Responsibilities: Educate yourself
If Producers have regulation, Consumers must act
Ethically:
Acting morally when it comes to taking part in
the market
Consumer Fraud and Scams
I.
Avoiding Scams
A. “If it is too good to be true, it probably is!”
B. “There is nothing free in life!”
C. Read all contracts
D. Get everything in writing
E. Never send money to win a prize
F. Contact the Attorney Generals Office (Consumer
Protections Agency)
Types of Scams
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.
I.
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