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UGA FHCE 3100 - Final Exam Study Guide

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FHCE 3100 1st EditionFinal Exam Study Guide Chapters 1, 2, 5, 12 & 13Also includes list of important dates and the banking crises explained. Chapter 1 & 2What 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 wholeWhat 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 HowardWho 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 areaEconomics 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 pricesSupply, law of supply, and quantity supplied Supply—a fundamental economic concept that describes the total amount of a specific goodor 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 thepool 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


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