HACE 3100 1nd EditionFinal Exam Study GuideEconomy○ 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 everythingeveryone wants; this implies choice and cost■ resources: things used to produce other things to satisfy people’sneeds/wants; these provide the means to satisfy the family system’sdemands● 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, andselect among alternate goods, actions, and services ■ Consumers: individuals/groups who obtain, use, maintain, and dispose ofgoods/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 theeconomy ● to become a consumer protection advocate, standing up forconsumer 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 aninvisible 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 theirroles 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, injuriousconsumption, 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 wereunlimited■ 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 thepurchase a reality● Implementing (buying) ○ actually buying and consuming the good/service● Evaluation (would I re-purchase?) ○ reflecting on the outcome; did you achieve satisfaction; wasthis the right choice; should you have picked an alternativechoice● **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 symbolicstructures that give such activity significance ○ how people live in accordance to beliefs, language, history,how they dress○ includes groups in which individual/family resides andtheir 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 theywant○ 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, increasedretails sales and housing■ recession: lasts 6 months to 1 year; temporary moderate decline ordownturn 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 ofconsumer confidence■ recovery: economic activity picks up, leading to expansion; production onthe rise, spending on the rise, unemployment starts declining, consumerconfidence rises ○ terms ■ unemployment: people considered unemployed when they do not have ajob but are actively searching/have searched within the last 4 weeks● government conducts current population survey (CPS) to measureunemployment in the country ● discouraged workers not counted○ marginally attached to labor force as they indicate theywant a job and have looked for work within the last yearand are available to work… but not seen as unemployed■ real gross domestic product (RGDP)● measure of all goods and services newly produced in a countryduring some period of time, usually one year or one quarter,adjusted for inflation○ inflation must be accounted for because it affects our tradew/other countries and what our dollar is worth■ inflation● steady increase of prices; makes purchasing power per dollarsmaller ■ deflation ● steady decline in prices; problem for firms and job seekers becausethey make less money and hire less people ■ supply● fundamental economic concept that describes the total amount of aspecific good/service available to consumers● law of supply: when supply increases, price comes down ● quantity supplied refers to amount of certain product producersoffer for sale at each possible price○ this means movement along supply curve due to change inprice; price changes apply quantity supplied, but don’timpact overall supply ● law of supply from producer’s pov○
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