Consumerism

1. Consumerism UNIT IV

2. Disposable and Discretionary Income • Consumer- a person or group who buys or uses goods and services to satisfy needs/want • Disposable income- $ to spend or save after taxes have been paid. • Discretionary Income- money to be spent after necessities have been bought • What two things can a person do with discretionary income????

3. Decisions for Consumers • Consumer decisions involve comparing available alternatives. • You must consider: • Opportunity cost- value of the highest alternative choice that you did not make. • Rational Choice- choosing the alternative that has the greatest value from among comparable-quality products. • Scarce resources- income and time need to be considered; time is for researching a product.

4. Saving or Spending • Individually: • List two things you spend money on regularly with discretionary income. • List two things you long term save for with discretionary Income. • Assess why you choose to spend money for certain things or save for certain things.

5. Consumer Journal • In this project, you will learn the steps of making a major purchase, including researching and comparison pricing. You will create a consumer journal to document your research and conclusions. • DECIDING WHAT TO LOOK FOR: In groups you will make a list of features you would look for in making a major purchase.

6. Step 1 Instructions • Individually choose one item you would save for out of: • Car • Hand held technology (i-pod, i-phone, smart phone, tablet, i-pad, etc.) • Technology system (computer, laptop, gaming system) • Educational (college, musical instrument, trade school) • Come up with a list of features you consider before purchasing this make or model • Write a description of each of the features’ importance • Rank these features by importance

7. Consumer Journal Part 2 • Step 2: GATHERING INFORMATION • You will look for information that will help find products with features that match the product features you wish for. • Look for advertisements on the internet/magazines to find brands to research. • Compare advertisements with your group. • Rank products based on your feature list from step 1. • Present your product advertisement and feature list to the class.

8. Consumer Rights • Consumerism- movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers. • 1962 JFK outlined four major rights: • Right to safety • Right to be informed • Right to choose • Right to be heard • (added by Nixon) Right to redress- compensation for damages caused by products

9. Americans and Credit • Credit- receipt of funds either directly or indirectly to buy goods and services in the present with the promise to pay them in the future. • Principal- amount originally borrowed in the loan. • Interest- amount the borrower must pay for the use of someone else’s funds • Installment debt- type of loan repaid with equal payments or installments over a specific period of time. • Durable goods- items with a life of more than 3 years. • Mortgage- Installment debts owed on houses, buildings or land.

10. Why do people use credit? • It allows consumers to enjoy something now rather than later. • Checklist for buying on credit: • Do I really require this item? Can I wait? • If I pay cash, what am I giving up? • Is the satisfaction from the item worth the interest? • Have I done comparison shopping for credit? • Can I afford to use credit now?

11. Types of Financial Institution • Commercial Bank- Main functions are to accept deposits, lend funds and transfer funds among banks, individuals and businesses. • Savings and Loan- depository institution that accepts deposits and lends funds. • Savings bank- depository institution originally set up to serve savers overlooked by commercial banks • Credit Unions- owned and operated by its members to provide savings accounts and low interest loans to only their members • Finance company- takes over contracts for installment debts from stores and adds a fee for collecting the debt

12. Charge accounts and credit cards • Charge account- account for a particular store allowing consumers to buy on credit • Credit card- charge purchases from anywhere to a company and pay them back plus interest • Finance charge- cost of credit expressed monthly in dollars • Annual percentage rate (APR)- cost of credit’s interest in yearly percentage amount.

13. Will you be able to get credit? • Credit Bureau- private business that investigates a person to determine the risk involved in lending to that person. • Credit check- investigation of a person’s income, current debts, personal life, and past borrowing and repaying history. • WHY WOULD A PERSON GET A BAD/GOOD CREDIT RATING? • Credit rating- rating of the risk involved in lending to a person or business. • Can you name any companies that advertise this topic? • Explain why YOUR CREDIT SCORE MATTERS? • Collateral- Something of value that a borrower lets a lender claim if loan is not repaid • Secure loan- backed up by collateral • Unsecure loan- guaranteed by a promise to repay it

14. Laws Protecting You • “Truth in Lending Act” and “Equal Credit Opportunity Act” are a few of many laws protecting you and your ability to borrow $ • Usury Law- law restricting the amount of interest that can be charged for credit. • Bankruptcy- the state of legally having been declared unable to pay off debts owed with available income; remains on your credit for 10 years; should be a last resort. • WHEN WOULD YOU HAVE TO USE BANKRUPTCY?

15. GET OUT YOUR BOOK • Open to page 111 • Do numbers 23-25 & 29 in partners. • #23 20 months • #24 Interest charges add to the balance each month so it takes longer to pay • #25 This is the total of interest charges over the 35 month period it took to pay off the debt; cost of borrowing the money • #29 • The interest almost is 2X as high as regular • Try to attract new customers • Card B • Under most circumstances, card A would be the best but depends • Average balance; if the balance was $5,000 card B would be better