HACE 3100 1nd Edition Final Exam Study Guide Economy Greek word meaning one who manages the household Economics study or science of production distribution consumption Goldsmith Economics study of how society manages scarce resources Miller scarcity resources are limited society cannot produce everything everyone wants this implies choice and cost resources things used to produce other things to satisfy people s needs wants these provide the means to satisfy the family system s demands material resources vs human resources i e oil vs intelligence Economists study how people make decisions how they interact with each other and the forces trends that affect the economy as a whole Consumer economics the study of how people deal w scarcity fulfill needs and select among alternate goods actions and services Consumers individuals groups who obtain use maintain and dispose of goods services in order to fulfill needs increase satisfaction Why study consumer economics to apply course knowledge to personal decisions to apply knowledge to social issues to overcome passivity and understand your own place in the economy to become a consumer protection advocate standing up for consumer rights i e Ralph Nader Clark Howard Goods vs Services tangible vs intangible goods Satisfaction well being utility interchangeable terms The Road to Consumer Economics Adam Smith 1776 The Wealth of Nations founder of modern economics consumers act on their own self interest and markets work with an invisible hand capitalism social system based on recognition of individual rights under this economics separated from the state consumerism believe that goods give meaning to individuals and their roles in society buying goods services based to some degree on trust consumption doesn t always result in higher satisfaction i e buying unsatisfactory good service injurious consumption fraud Caveat emptor may the buyer beware Class action lawsuits What Affects Consumer Decisions Maslow s Hierarchy of Needs what people need vs what people want needs are things such as food and shelter wants are things such as wealth and fancy items wants are what people would acquire if their resources were unlimited The Consumption Process Awareness what do I need want A stimulus lets us know what is needed or wanted Thinking gather information this is the mental exploration of the possibilities weighing pros and cons random set of thoughts Planning shopping around deciding the ordered steps of action needed to make the purchase a reality Implementing buying actually buying and consuming the good service Evaluation would I re purchase reflecting on the outcome did you achieve satisfaction was this the right choice should you have picked an alternative choice The value of goods is subjective and based on preference Needs vs wants vs goals Factors That Influence Consumers Economics price of goods disposable income etc unemployment rate interest rates inflation rates History the background of each person influences decisions includes own and familial history Consumer Culture generally refers to patterns of human activity and symbolic structures that give such activity significance how people live in accordance to beliefs language history how they dress includes groups in which individual family resides and their behaviors traditions Individual Traits i e age eye color hair type weight height Physiological Needs i e thirst hunger safety housing protection Desire for Technology includes methods materials individuals use to get what they want includes machines techniques processes Political Area i e government regulations politics such as changing policies regarding consumption sales taxes legal illegal drugs insurance policies relationship between demographics and marketing Economics and the Business Cycle business cycle refers to periodic fluctuations of economic activity cyclical stages 3 expansion prosperity growth high output low unemployment increased retails sales and housing recession lasts 6 months to 1 year temporary moderate decline or downturn in the economy characterized by declining output income employment and trade a recession that is worse lasts longer than a year depression 2008 not labeled depression because of potential loss of consumer confidence recovery economic activity picks up leading to expansion production on the rise spending on the rise unemployment starts declining consumer confidence rises terms unemployment people considered unemployed when they do not have a job but are actively searching have searched within the last 4 weeks government conducts current population survey CPS to measure unemployment in the country discouraged workers not counted marginally attached to labor force as they indicate they want a job and have looked for work within the last year and are available to work but not seen as unemployed real gross domestic product RGDP measure of all goods and services newly produced in a country during some period of time usually one year or one quarter adjusted for inflation inflation must be accounted for because it affects our trade w other countries and what our dollar is worth inflation steady increase of prices makes purchasing power per dollar smaller deflation steady decline in prices problem for firms and job seekers because they make less money and hire less people supply fundamental economic concept that describes the total amount of a specific good service available to consumers law of supply when supply increases price comes down quantity supplied refers to amount of certain product producers offer for sale at each possible price this means movement along supply curve due to change in price price changes apply quantity supplied but don t impact overall supply law of supply from producer s pov economic rule stating price and quantity supplied move in the same direction as price goes up larger quantities supplied why does the supply curve shift prices of other goods the supply of one good may decrease if the market price of another good increases causing producers to reallocate resources to produce larger quantities of the more profitable good prices of relevant inputs if cost of resources used to produce the good increases sellers raise the price of finished good technological advances increase production efficiency and move supply curve to the right demand signifies ability or willingness of consumers to buy a particular commodity at a given point in time there is a demand for the good