Presentation Plus! Economics: Today and Tomorrow Copyright © by The McGraw-Hill Companies, Inc. Developed by FSCreations, Inc., Cincinnati, Ohio 45202 Send all inquiries to: GLENCOE DIVISION Glencoe/McGraw-Hill 8787 Orion Place Columbus, Ohio 43240 CHAPTER FOCUS SECTION 1 Consumption, Income, and Decision Making SECTION 2 Buying Principles or Strategies SECTION 3 Consumerism CHAPTER SUMMARY CHAPTER ASSESSMENT 3 Click a hyperlink to go to the corresponding section. Press the ESC key at any time to exit the presentation. Why It’s Important If you are thinking about buying a computer, should you visit every computer store in the area? What should you do if your purchase is defective? This chapter will help you learn to make rational consumer choices. Click the Speaker button to listen to Why It’s Important. 4 Chapter Overview Chapter 3 explains the difference between disposable and discretionary income and examines how each is spent, explores the role of advertising, and reviews the rights and responsibilities of consumers. 5 Click the mouse button to return to the Contents slide. Reader’s Guide Section Overview Section 1 explains the difference between disposable and discretionary income and describes five considerations in consumer decision making. Objectives – What is the difference between disposable and discretionary income? – What three considerations should govern your decision making as a consumer? 7 Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 59 of your textbook. Reader’s Guide (cont.) Terms to Know – consumer – disposable income – discretionary income – rational choice Click the Speaker button to listen to the Cover Story. 8 Click the mouse button or press the Space Bar to display the information. Section 1 begins on page 59 of your textbook. Introduction • You and everyone around you are consumers and, as such, play an important role in the economic system. • A consumer is any person or group that buys or uses goods and services to satisfy personal needs and wants. consumer any person or group that buys or uses goods and services to satisfy personal needs and wants 9 Introduction (cont.) • Consumers buy a wide variety of things—food, clothing, automobiles, movie tickets and veterinary care. • In this section you’ll learn how to spend—or not spend—your income wisely. 10 Lecture Launcher • For most of the 20th century athletes were not paid the millions of dollars that seem so commonplace today. In fact, many players took a second job during their off-season so they could pay their bills. Yankees players Phil Rizzuto and Yogi Berra even opened a men’s clothing store. • Would you be more likely to visit a store owned by a famous celebrity than one owned by a non-celebrity? • Would you be willing to pay 10 percent more for an item in the celebrity’s store? 11 Click the mouse button or press the Space Bar to display the information. Disposable and Discretionary Income • The ability to consume depends on a person’s available income and how much of it is spent or saved. • Disposable income is money left after paying all taxes, whereas discretionary income is money left after paying for necessities or money that can be saved or spent on luxury items. 12 Click the mouse button or press the Space Bar to display the information. Disposable and Discretionary Income (cont.) • Education, occupation, experience, health, location, and wages can all influence a person’s ability to consume. • Spending income requires constant decision making. 13 Click the mouse button or press the Space Bar to display the information. Disposable and Discretionary Income (cont.) Figure 3.1 Consumer Spending The circle graph shows how Americans spend their income. Disposable and Discretionary Income (cont.) Figure 3.3 Earning Power The number of years you are educated has a direct effect on your income. Discussion Question Create a budget that lists all of your expenses. Which expenses are paid with disposable income? Discretionary income? Answers will vary, but students should demonstrate a clear understanding of the difference between disposable and discretionary income. 16 Click the mouse button or press the Space Bar to display the answer. Decision Making as a Consumer • Whether or not to buy an item • Time costs—invest time in obtaining information about the item • Opportunity costs—choosing between a low-, medium-, or high-quality item • Rational choice is making a decision based on opportunity costs. • Choose the best quality item that is the least expensive and will satisfy your wants. • Rational consumers will all make different choices. 17 Click the mouse button or press the Space Bar to display the information. Discussion Question Think of a recent purchase you made. What were the decisions you made throughout the buying process? While the purchases may vary, the process should include whether or not to buy the item, how much time was invested in obtaining information about the item, if they evaluated opportunity costs, and if they felt their choice was a rational one. 18 Click the mouse button or press the Space Bar to display the answer. Section Assessment What kinds of products are purchased with discretionary income? Discretionary income is used to purchase extras such as luxury items or entertainment. 19 Click the mouse button or press the Space Bar to display the answer. Section Assessment (cont.) Graphic Organizer Create a diagram like the one on page 64 of your textbook to describe three things a consumer should consider before deciding to make a purchase. 1. Do I really require this item? 2. Is this good or service worth the time I spent earning the income to pay for it? 3. Is there any better use for my income now? 20 Click the mouse button or press the Space Bar to display the answer. Section Assessment (cont.) Rational Choice List three major purchases you’ve made in the past month. Explain why you think you did or did not apply rational choice when making the purchases. Answers will vary. 21 Click the mouse button or press the Space Bar to display the answer. Section Close Discuss the following: You are thinking of hiring a disc jockey for a school dance. What would you consider in making this hiring decision? 22 Click the mouse button to return to the Contents slide. Reader’s Guide Section Overview Section 2 explains or describes the trade-offs required in gathering buying information, various forms of advertising, and how consumers practice comparison shopping. Objectives – What trade-offs occur when you are gathering information? – What forms of advertising exist? – How can you learn to practice comparison shopping? 24 Click the mouse button or press the Space Bar to display the information. Section 2 begins on page 66 of your textbook. Reader’s Guide (cont.) Terms to Know – competitive advertising – informative advertising – bait and switch – comparison shopping – warranty – brand name – generic brand Click the Speaker button to listen to the Cover Story. 25 Click the mouse button or press the Space Bar to display the information. Section 2 begins on page 66 of your textbook. Introduction • The goal of advertisements is to win your consumer dollars, and advertisers are willing spend millions of dollars to attract you attention to their products. • Because of the problems of scarce income and time, however, your goal should be to obtain the most satisfaction from your limited income and time. 26 Click the mouse button or press the Space Bar to display the information. Introduction (cont.) • In this section, you’ll learn about three basic buying principles that can help you and all consumers achieve this goal: – gathering information – using advertising wisely – comparison shopping 27 Click the mouse button or press the Space Bar to display the information. Lecture Launcher • Advertisements have a powerful effect on consumer choice. Around 60 percent of swimsuits purchased are never used for swimming. Yet, Americans spend almost $2 billion annually on them. • How many shops would you visit and how much information would you gather before purchasing a swimsuit? 28 Click the mouse button or press the Space Bar to display the information. Gathering Information • Takes time and research • Try to find out only what you need to know. • Getting accurate information from a salesperson is a life-long skill. • Use the Internet to research a product and the companies selling it. 29 Click the mouse button or press the Space Bar to display the information. Discussion Question Name four major purchases in which accurate information from a salesperson would be helpful? What types of information might the salesperson provide? Answers will vary. Information should relate to the product’s quality, usefulness, competitive edge, and so on. 30 Click the mouse button or press the Space Bar to display the answer. Using Advertising Wisely • Advertising is everywhere. • Competitive advertisements try to convince people one product is better than another product and try to create brand-name recognition or loyalty. • Informative advertisements provide information about the product, such as price or features. • Some advertisements use deceptive tactics, such as bait and switch, to present their products. 31 Click the mouse button or press the Space Bar to display the information. Using Advertising Wisely • They “bait” by advertising the item at a low price, but say it is out of stock when the consumer gets to the store. • They “switch” by trying to sell a higher priced item instead, promoting its good features over the out-of stock item. 32 Click the mouse button or press the Space Bar to display the information. Discussion Question Why do you think bait and switch advertising is illegal? If it were allowed, then people could not trust any advertisements. Consumer fraud hurts all companies and their consumers. 33 Click the mouse button or press the Space Bar to display the answer. Comparison Shopping • Compare different stores and companies. • Use information obtained from other stores to negotiate lower prices. • Consider the different product warranties. • Compare the value of generic to brand name products. 34 Click the mouse button or press the Space Bar to display the information. Discussion Question Consider the reasons that people might have for shopping exclusively at one store. When might this be better than comparison shopping? 35 Click the mouse button or press the Space Bar to display the answer. Discussion Question (cont.) Someone might shop exclusively at one store because of its convenience or because they like the service that they receive. It can be better than comparison shopping when the value of service is more important to the consumer. It can also be better when the price difference is so small that to comparison shop would take more time than it’s worth. 36 Click the mouse button or press the Space Bar to display the answer. Section Assessment What trade-offs occur when you are gathering information? Consumers trade time and effort when gathering information. For some consumers, time may also represent money. 37 Click the mouse button or press the Space Bar to display the answer. Section Assessment (cont.) Graphic Organizer Create a chart like the one on page 70 of your textbook to analyze and label at least 10 advertisements as to whether they are competitive or informative. Charts will vary. 38 Click the mouse button or press the Space Bar to display the answer. Section Assessment (cont.) How can you learn to practice comparison shopping? You can practice comparison shopping by gathering information on the types and prices of products available from different stores or companies. 39 Click the mouse button or press the Space Bar to display the answer. Section Assessment (cont.) Advertising Think of an advertisement you’ve seen in the past week. Analyze the ad by applying it to the six points in Figure 3.7 on page 68. Was the ad successful in influencing your consumer behavior? Why or why not? Answers will vary. 40 Click the mouse button or press the Space Bar to display the answer. Section Close Analyze the buying strategies you would follow when making a purchase of personal property such as buying a television. 41 Click the mouse button to return to the Contents slide. Reader’s Guide Section Overview Section 3 explains or describes consumer rights, private and government agencies that protect and enforce those rights, and the relationship between consumer responsibilities and ethical behavior. Objectives – What are your rights as a consumer? – What private and federal help can you receive as a consumer? – What are your responsibilities as a consumer? 43 Click the mouse button or press the Space Bar to display the information. Section 3 begins on page 72 of your textbook. Reader’s Guide (cont.) Terms to Know – consumerism – ethical behavior Click the Speaker button to listen to the Cover Story. 44 Click the mouse button or press the Space Bar to display the information. Section 3 begins on page 72 of your textbook. Introduction • Most Americans are concerned with the reliability of the products and services they use. • Many private groups and government actions work to ensure the well-being of consumers. • Consumers themselves, however, must be proactive in their buying habits. 45 Click the mouse button or press the Space Bar to display the information. Introduction (cont.) • In this section, you’ll learn how consumerism, a movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers, affects you personally. consumerism movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers 46 Click the mouse button or press the Space Bar to display the information. Lecture Launcher • The National Consumers League, founded in 1899, was the first American consumer advocacy organization. They work to protect consumers’ health and safety and to promote fairness in the marketplace. • Have you or anyone you know ever contacted a consumer organization? Why? • If you have never contacted a consumer organization, do you think the existence of these organizations has provided you with any benefits? 47 Click the mouse button or press the Space Bar to display the information. Consumer Rights • Businesses are now responsible for product safety, healthful food, and accurate advertising. • Since 1962, consumers have the right to product safety, to be informed about their product, to choose from a variety of products and to be considered in making laws about products. • Consumers also gained the right to redress or obtain payment for damages caused by products. 48 Click the mouse button or press the Space Bar to display the information. Discussion Question Imagine what life was like before consumer rights. How might shopping have been different? Consumers would have had no voice when they received defective products. They would have to have been much more conscientious when shopping, and might not have had a choice in regard to the types of products they could purchase. 49 Click the mouse button or press the Space Bar to display the answer. Help for Consumers • People can complain to store managers and manufacturers when dissatisfied with a product. • Better Business Bureaus give information on products and help to settle buyer and seller disagreements. • There are magazines and private consumer groups that provide helpful information on products. • Federal agencies require consumer notification and warranties. 50 Click the mouse button or press the Space Bar to display the information. Discussion Question Explain how a magazine can help consumers. Consumers can investigate the different features of similar products. They also can find out if other consumers have been pleased or disappointed with a product. Magazines can also help consumers to compare prices. 51 Click the mouse button or press the Space Bar to display the answer. Consumer Responsibilities • Be informed about purchases. • Consumers need to initiate the problemsolving process when a product or service is faulty. • Practice honest and ethical behavior. • Only return products with legitimate faults. 52 Click the mouse button or press the Space Bar to display the information. Discussion Question When people return items that they misused, claiming they were faulty, they often think it hurts no one. How, in fact, does this behavior hurt all consumers? All consumers pay higher prices for products when people return items that they broke themselves. The manufacturer will not just incur the cost. Eventually the item’s price goes up to make up for the manufacturer’s loss. 53 Click the mouse button or press the Space Bar to display the answer. Section Assessment Graphic Organizer Create a diagram like the one on page 75 of your textbook to list your rights as a consumer. Consumer rights include: – safety – to be informed – choice – to be heard – redress 54 Click the mouse button or press the Space Bar to display the answer. Section Assessment (cont.) What private and federal help can you receive as a consumer? Private organizations give consumers information on products and selling practices; some help settle disagreements between buyers and sellers. Federal agencies set health and safety requirements, inspect products, promote free and fair competition, and provide a great deal of consumer information. 55 Click the mouse button or press the Space Bar to display the answer. Section Assessment (cont.) What are your consumer responsibilities? Your responsibilities are to learn as much about the product that you (the consumer) wish to buy, to initiate the problem-solving process if a product is faulty, and to behave ethically in dealing with producers and sellers. 56 Click the mouse button or press the Space Bar to display the answer. Section Assessment (cont.) Consumerism Describe two examples of how you educated yourself about a product before buying it. Answers will vary. 57 Click the mouse button or press the Space Bar to display the answer. Section Close Write a paragraph on how knowing your responsibilities as consumers makes you better citizens. 58 Click the mouse button to return to the Contents slide. Section 1: Consumption, Income, and Decision Making • A consumer is any person or group that buys or uses goods and services to satisfy personal wants. • Income can be both disposable and discretionary. • Education, occupation, experience, and health can all make differences in a person’s earning power and thus in his or her ability to consume. 60 Click the mouse button or press the Space Bar to display the information. Section 1: Consumption, Income, and Decision Making (cont.) • Making consumer decisions involves three parts: (1) deciding to spend your money; (2) deciding on the right purchase; and (3) deciding how to use your purchase. • When you make consumer decisions based on opportunity cost, you are engaging in rational choice. 61 Click the mouse button or press the Space Bar to display the information. Section 2: Buying Principles or Strategies • Three basic buying principles that can help you obtain the most satisfaction from your limited income and time are gathering information, using advertising wisely, and comparison shopping. • The value of your time and effort spent gathering information should not be greater than the value you receive from making the best choice of product. 62 Click the mouse button or press the Space Bar to display the information. Section 2: Buying Principles or Strategies (cont.) • Most advertising falls under one of two types: competitive advertising or informative advertising. Be aware of deceptive advertising, which includes bait and switch. • To efficiently comparison shop, read newspaper advertisements, make telephone calls, surf the Internet, and visit different stores. Also consider the product’s warranty, and brand-name versus generic manufacturers. 63 Click the mouse button or press the Space Bar to display the information. Section 3: Consumerism • Consumerism is a movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers. • Consumer advocates promote the following consumer rights: the right to safety, to be informed, to choose, to be heard, and to redress. • Private groups that aid consumers include local citizens’ action groups and the Better Business Bureau. 64 Click the mouse button or press the Space Bar to display the information. Section 3: Consumerism (cont.) • Numerous federal agencies have programs to aid consumers, including the Consumer Product Safety Commission and the Food and Drug Administration. • Consumers’ responsibilities include reading contracts and warranties, following directions for proper use of the product, initiating the problem-solving process, and exhibiting ethical behavior. 65 Click the mouse button or press the Space Bar to display the information. Click the mouse button to return to the Contents slide. Recalling Facts and Ideas Before you buy anything, what three questions should you ask yourself? Do I really need this? Is it worth the time? Is there any better use for my money? 67 Click the mouse button or press the Space Bar to display the answer. Recalling Facts and Ideas (cont.) Do all rational consumers think alike? Why or why not? No. People disagree about what generates the greatest value for any expenditure. 68 Click the mouse button or press the Space Bar to display the answer. Recalling Facts and Ideas (cont.) What are three important buying principles? Three important buying principles are gathering information, using advertising wisely, and comparison shopping. 69 Click the mouse button or press the Space Bar to display the answer. Recalling Facts and Ideas (cont.) What are two types of advertising? Two types of advertising are competitive advertising and informative advertising. 70 Click the mouse button or press the Space Bar to display the answer. Recalling Facts and Ideas (cont.) How much information should you obtain before you make a purchase? You should gather enough information to make an informed choice. 71 Click the mouse button or press the Space Bar to display the answer. Recalling Facts and Ideas (cont.) What are the four consumer rights that President John F. Kennedy stated? The four consumer rights are the rights to safety, to be informed, to choose, and to be heard. 72 Click the mouse button or press the Space Bar to display the answer. Recalling Facts and Ideas (cont.) What are two consumer responsibilities? Answer will vary. 73 Click the mouse button or press the Space Bar to display the answer. Thinking Critically Understanding Cause and Effect Create a diagram like the one on page 78 of your textbook to explain how education, occupation, and location make a difference in a person’s earning power. Better education, higher-paying occupation, and city location lead to higher earning power. Lower levels of education, lower-paying occupation, and rural location lead to reduced earning power. 74 Click the mouse button or press the Space Bar to display the answer. Thinking Critically (cont.) Making Generalizations Why do some people buy brand-name products and other people buy generic products? What are the trade-offs involved in this decision? Answers will vary. 75 Click the mouse button or press the Space Bar to display the answer. Reviewing Skills Distinguishing Fact From Opinion Analyze the advertisement below, then answer the questions that follow. WE DELIVER! Air freight. Ocean service. Less-than-truckload. Full truckload. Nationally. Globally. We’re a group of market-leading businesses that deliver in a “need-it-now” world. We’re a $5 billion company, with 33,000 people, 25,000 pieces of equipment, up to 100 jet freighters, and the industry’s most advanced information systems. 76 Click the mouse button or press the Space Bar to display the answer. Reviewing Skills (cont.) Which of the statements in the ad are based on facts? Explain. The following phrases are based on facts: “Air freight. Ocean services. Less-than-truckload. Full truckload. Nationally. Globally”; “We’re a $5 billion company, with 33,000 people, 25,000 pieces of equipment, up to 100 jet freighters.” They can be checked by looking at statistics available in company industry records. 77 Click the mouse button or press the Space Bar to display the answer. Reviewing Skills (cont.) Which of the statements are based on opinion? Explain. The following statements are based on opinion: “market-leading businesses” and “industry’s most advanced information systems.” They are value judgments. 78 Click the mouse button or press the Space Bar to display the answer. What manufacturer’s agreement allows you to return a watch for free repair during a stated period? warranty 79 Click the mouse button or press the Space Bar to display the answer. Click the mouse button to return to the Contents slide. Identify a product you have recently purchased. Before making your purchase, what questions did you ask yourself and others, and what information did you look for? Why did you buy this particular item and not another? Do you think you acted wisely in making your purchase? Why or why not? Click the mouse button or press the Space Bar to display the next question. Explore online information about the topics introduced in this chapter. Click on the Connect button to launch your browser and go to the Economics: Today and Tomorrow Web site. At this site, you will find interactive activities, current events information, and Web sites correlated with the chapters and units in the textbook. When you finish exploring, exit the browser program to return to this presentation. If you experience difficulty connecting to the Web site, manually launch your Web browser and go to http://glencoe.com/sec/socialstudies/economics/econtoday2005/i ndex.php Explore online information about the topics introduced in this chapter. Click on the Connect button to launch your browser and go to the BusinessWeek Web site. At this site, you will find up-to-date information dealing with all aspects of economics. When you finish exploring, exit the browser program to return to this presentation. If you experience difficulty connecting to the Web site, manually launch your Web browser and go to http://www.businessweek.com Grab Some Cash, Check Out a Flick The ATM at the Rock and Roll Hall of fame in Cleveland, Ohio, plays music, not advertisements. Shaped like a jukebox, the ATM blasts snippets of rock songs while it dispenses cash. Banks are not rushing to install musical cash machines, however. The jukebox model costs about $37,000 to manufacture. Read the BusinessWeek Grab Some Cash, Check Out a Flick article on page 71 of your textbook. Continued on next slide. This feature is found on page 71 of your textbook. Grab Some Cash, Check Out a Flick Where has advertising now appeared? Advertising has now appeared on the screens of ATMs. Continued on next slide. Click the mouse button or press the Space Bar to display the answer. This feature is found on page 71 of your textbook. Grab Some Cash, Check Out a Flick Do you think this type of advertising would have an effect on your consumer decisions? Why or why not? Answers will vary. Click the mouse button or press the Space Bar to display the answer. This feature is found on page 71 of your textbook. Continued on next slide. Continued on next slide. Continued on next slide. Economics and You Video 9: Your Role as a Consumer After viewing Your Role as a Consumer, you should be able to… • compare and contrast disposable and discretionary income. • identify aspects of wise consumer decision making. • describe some federal consumer protection activities. Continued on next slide. Click the mouse button or press the Space Bar to display the information. Economics and You Video 9: Your Role as a Consumer Disc 1, Side 1 Chapter 9 Click the Videodisc button anytime throughout this section to play the complete video if you have a videodisc player attached to your computer. Click the Forward button to view the discussion questions and other related slides. Click inside the box to play the preview. Continued on next slide. Economics and You Video 9: Your Role as a Consumer What is a consumer? A consumer is a person who purchases goods and services. Disc 1, Side 1 Chapter 9 Click the mouse button or press the Space Bar to display the answer. Distinguishing Fact From Opinion Distinguishing fact from opinion can help you make reasonable judgments about what others say and write. Facts can be proved by evidence such as records, documents, or historical sources. Opinions are based on people’s differing values and beliefs. Continued on next slide. This feature is found on page 65 of your textbook. Distinguishing Fact From Opinion Learning the Skill • Read or listen to the information carefully. Identify the facts. Ask: Can these statements be proved? Where would I find information to verify them? • If a statement can be proved, it is factual. Check the sources for the facts. Often statistics sound impressive, but they may come from an unreliable source. Continued on next slide. Click the mouse button or press the Space Bar to display the information. This feature is found on page 65 of your textbook. Distinguishing Fact From Opinion Learning the Skill (cont.) • Identify opinions by looking for statements of feelings or beliefs. The statements may contain words like should, would, could, best, greatest, all, every, or always. Continued on next slide. This feature is found on page 65 of your textbook. Distinguishing Fact From Opinion Practicing the Skill • Read the excerpt on page 65 of your textbook, then answer the questions on the following slides. Continued on next slide. This feature is found on page 65 of your textbook. Distinguishing Fact From Opinion What are three factual statements in the passage? The robot is priced at $2,000; it is called AIBO; aibo is a Japanese word for “companion”; AIBO is also short for Artificial Intelligence Robot; AIBO is a robotic dog. Continued on next slide. Click the mouse button or press the Space Bar to display the answer. This feature is found on page 65 of your textbook. Distinguishing Fact From Opinion Which statements are opinions? Explain. almost certainly the world’s most sophisticated entertainment robot; AIBO is just smart enough not to fall off the edge of a table; such companions could be running errands, helping with household chores, and assisting the handicapped. Phrases such as “almost certainly,” “most sophisticated,” “just smart enough,” and “could be” act as signals for opinions. Click the mouse button or press the Space Bar to display the answer. This feature is found on page 65 of your textbook. Studies reveal that Americans are bombarded with 3,000 to 5,000 advertising messages a day. The assault is so overwhelming that people scarcely notice most of these messages. Oprah Winfrey 1954– Click the picture to listen to the selection on page 76 of your textbook to find out more about Oprah Winfrey. Be prepared to answer questions that appear on the next two slides. Continued on next slide. This feature is found on page 76 of your textbook. Oprah Winfrey 1954– What corporation does Oprah head? HARPO Entertainment Group Continued on next slide. Click the mouse button or press the Space Bar to display the answer. This feature is found on page 76 of your textbook. Oprah Winfrey 1954– In what ways does Oprah try to help others? She makes generous donations to charities and encourages her viewers to “practice random acts of kindness.” Click the mouse button or press the Space Bar to display the answer. This feature is found on page 76 of your textbook. End of Custom Shows WARNING! Do Not Remove This slide is intentionally blank and is set to auto-advance to end custom shows and return to the main presentation. Click the mouse button to return to the Contents slide.