UGA FHCE 3100 - Final Exam Study Guide (33 pages)

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Final Exam Study Guide

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Final Exam Study Guide


Includes notes from Ch.1,2,12,13 Timeline of important dates Financial crises explained

Study Guide
University of Georgia
Fhce 3100 - Introduction to Personal Finance
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FHCE 3100 1st Edition Final Exam Study Guide Chapters 1 2 5 12 13 Also includes list of important dates and the banking crises explained Chapter 1 2 What does economy mean The word comes from a Greek word for one who manages a household Economics is the study or science of production distribution and consumption Goldsmith Economics is the study of how society manages its scarce resources Miller Scarcity means that society has limited resources and therefore cannot produce all the goods and services people wish to have Scarcity not enough resources available to satisfy one s needs and wants and choices scarcity is created due to unlimited wants combined with limited supplies The management of society s resources is important because they are scarce Scarcity implies choice and choice implies cost What do economists study How people make decisions How people interact with each other The forces and trends that affect the economy as a whole What is consumer economics The study of how people deal with scarcity fulfill needs and select among alternative goods services and actions Why do we study consumer economics To apply course knowledge to personal decisions Ex when you pump gas ALWAYS disconnect from your card To apply course knowledge to social issues Ex health care these issues will affect you To overcome passivity to understand and own your place in the economy To become a Consumer Protection Advocate Standing up for your consumer rights ex Clark Howard Who are consumers Individuals and groups who obtain us maintain and dispose of goods products and services to fulfill needs and increase satisfaction Satisfaction utility wellbeing Goods v Services Good tangible object ex Car Service intangible actions you buy the service ex Catering service Buying goods and services is an act of trust Consumption may not always bring satisfaction There are unsatisfactory products Injurious consumption happens when individuals or families make consumption decisions that will have negative consequences affecting their quality of life in the long run Caveat emptor means buyer beware ex Ford Explorer 1991 Who is Adam Smith He is the founder of modern economics He said consumers act in their own self interest He thought consumers should be given the freedom and authority to run their own economic affairs What is consumerism The belief that goods give meaning to individuals and their roles in society Ex Engagement ring How much does this belief drive our consumption habits Consumerism is a way to define self family and community through the ownership the use and ultimately the disposal of goods Ex Owning a Lexus sends a different message than owning a Kia Goods and services to meet human needs Maslow s Hierarchy of needs Basic human needs like hunger and thirst must be met at least partially before safety love esteem and self actualization can be fulfilled Needs the barest human necessity Wants what people would acquire if their resources were unlimited ex Taller richer What are resources Things used to produce other things to satisfy people s needs and wants Provides the means to satisfy the family What is the consumption process 1 Awareness what are needs wants stimulus triggers this Ex Computer breaks stimulus triggered that you need a new one 2 Thinking gathering info mental exploration of possibilities pros v cons 3 Planning shopping around deciding ordered steps of action 4 Implementing buying comparing prices 5 Evaluating reflecting post purchase What factors influence consumers Economics History Consumer culture Individual traits Physiological needs Desire for technology Political area Economics and the Business Cycle Economics is the study of production distribution and consumption It is the study of how societies use scarce resources to produce valuable commodities and distribute them among different people The Business Cycle refers to the periodic fluctuating of economic activity Expansion Recession Recovery Expansion prosperity growth high output low unemployment increased retail sales and housing 8 8 million lost jobs in Great Recession Here economic activity and investing increases while interest rate decreases Recession temporary moderate decline in the economy recurring period of decline in total output Recovery when economic activity picks up leading to expansion Production on the rise spending on the rise unemployment declines consumer confidence rises Unemployment persons are classified as unemployed if they do not have a job have actively looked for work in the prior 4 weeks and are currently available for work Note this does NOT include discouraged workers Deep recession is called a depression What is the Real Gross Domestic Product A measure of the value of all goods and services newly produced I a country during some period of time usually one year or one quarter adjusted for inflation It is a measure of how healthy economy is Allows us to compare with other countries Inflation and Deflation Inflation the steady increase of prices Makes the purchasing power of your dollar SMALLER a dollar just wont buy what it used to Deflation indicates falling prices Supply law of supply and quantity supplied Supply a fundamental economic concept that describes the total amount of a specific good or service that is available to consumers ex Irish Potato Famine no supply for anyone ex 9 11 shortage of American flags demand increased and supply could not keep up Law of supply Goldsmith The overall supply of a good or service goes up generally the prices goes down As the pool of available workers increases the wages offered decreases Ex as the supply of shuttle services increased the price per trip decreased Law of supply Miller An economic rule stating that the price and quantity supplied move in the same direction As the price goes up for a good or service producers of that good or service generally provide larger quantities all other things being constant Quantity supplied The quantity supplied refers to the amount of a certain product producers are able willing to offer for sale at each possible price ex Steak v dog food It means movement along the supply curve due to a change in price Price changes affect the quantity supplied but do not impact the overall supply THEREFORE If the price that producers are able to get consumers to pay increases the quantity of that product that producers are willing to supply should also increase If the price consumers are willing to pay decreases the

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