Economics: Notes on Consumer Role, Buying Principles & Consumerism

Economics Chapter 3: Your Role as a Consumer

Section 1: Consumption, Income, and Decision Making

• Consumer: Any individual or group that purchases and uses goods/services to meet personal needs and wants.
• Disposable Income: The income available for spending or saving after taxes have been deducted.
• Discretionary Income: The remaining income that can be spent on non-essential items after necessary expenditures are made.

Decision-Making as a Consumer

• Needs vs Wants: Understanding the difference is crucial for effective consumer behavior.
• Scarcity of Time and Money: These are limited resources impacting consumer choices.
• Opportunity Cost: The benefits lost when choosing one alternative over another.
• Rational Choice: Selecting the option with the highest value among comparable products.

Section 2: Buying Principles and Strategies

• Information Gathering: Collect enough information to make informed choices about purchases.
• Evaluating Worthwhile Choices: Develop a knowledge base about products/services.
• Using the Internet: A valuable resource for product research, reviews, and price comparisons.

Types of Advertising

• Competitive Advertising: Aims to show a product as superior and different from competitors.
• Informative Advertising: Provides useful details about a product to assist consumers.
• Bait and Switch: Advertises a low-priced product but persuades consumers to purchase a more expensive item.

Comparison Shopping

• Obtaining data on product types and prices across various retailers through:
• Newspapers
• Internet
• Store visits
• Phone inquiries
• Conversations with friends
• Note: This process can be time-consuming.

Warranty

• Definition: A commitment from the manufacturer or seller to repair or replace a faulty product within a specified timeframe.
• Brand vs Generic:
• Brand Name: Distinctive name or logo that differentiates a product from others.
• Generic Brand: General term for a product without a specific brand label.

Section 3: Consumerism

• Consumerism Definition: A movement aimed at educating buyers to make informed purchases and advocate for safer, improved products from manufacturers.
• Consumer Rights:
• The right to safety
• The right to be informed
• The right to choose
• The right to be heard
• The right to redress

Ethical Behavior

• Acting in line with moral beliefs about right and wrong.

Resources for Consumers

• Sources of information regarding products include:
• Internet
• Retail stores
• Television advertisements
• Magazines
• Understanding the two main resources: income and time.
• Repeat Definitions:
• Discretionary Income: Money remaining for extras after basic needs.
• Bait and Switch: Strategy of luring consumers with low-priced items only to upsell more expensive products.
• Consumer Rights: Including safety, information, choice, voice, and restitution.