EconomyThe word “Economy” comes from a Greek word for “one who manages a household”Economics study or science of production, distribution & consumption- Goldsmith study of how society manages its scarce resources – MillerScarcity  society has limited resources and therefore cannot produce all the goods and services people wish to haveThe management of society’s resources is important because resources are scarceScarcity implies choice and choice implies costNot enough resources are available to satisfy one’s needs and want and choices have to be made about their useEconomics study…How people make decisionsHow people interact with each otherThe forces and trends that affect the economy as a wholeConsumer Economics  the study of how people deal with scarcity, fulfill needs, and select among alternative goods, services, and actionsConsumer Economics lead to careers in consumer protection, consumer advocacy, policy making, education, law, business, management, government, marketingWhy Study consumer economics?1. To apply course knowledge to social issues:Recent economic legislation will have an impact on:HealthcareCleaner coal burning technologyScreening tests for newbornsDown’s syndrome screening2. To overcome passivity—to understand and own your place in the economy3. To become a Consumer Protection AdvocateStanding up for consumer rightsOne person can make a differenceRalph Nader (automobiles)Erin Brockovich (environmental laws)Consumers  individuals and groups who obtain, use, maintain, and dispose of goods (products) and services to fulfill needs and increase satisfactionGoods  tangible objects (Car)Services  intangible actions of work done (catering services)Satisfaction  also known as “utility” (satisfaction, well-being)Adam Smith (1776)  Author of “An Inquiry into the Nature & Causes of the Wealth of Nations” stated that:“consumers act in their own self interest and markets work with the invisible hand”The founder of modern economics (aka the Father of modern economics)Felt consumers should be given the freedom and authority to run their own economic affairsThe U.S.’s founding fathers liked the idea that wealth should be based on goods and services produced and consumed by consumersCapitalism  a social system based on the recognition of individual rightsUnder capitalism, the state is separated from economics (production and trade), just like the state is separated from church/religionBeing able to freely choose among a vast array of commodities gives people a sense of freedomConsumerism  belief that goods give meaning to individuals and their roles in societyBuying goods and services is an act of trustBecause we assume our purchases will increase our satisfaction; however…Consumption may not always bring satisfactionUnsatisfactory productsInjurious consumption (negative in the long-run)Consumer fraudNeeds  the barest minimum physical necessities that allow you to surviveMarslow’s Hierarchy of NeedsWants  what people would acquire if their resources were unlimitedJohnny Depp vs. BaconResources  things used to produce other things to satisfy people’s needs and wantsProvide the means to satisfy the family system’s demandsMaterial Resources  (non-human) oil, car, clothesHuman Resources  (personal characteristics) friends, IQ, time managementThe Consumption ProcessBecause there are so many aspects of consumption it can be thought of as a process1. Awareness  what are needs and wantsA “stimulus” lets us know that something is needed or desiredEx. A Broken computer makes us aware another one is needed2. Thinking  gather informationThe mental exploration of the possibilities: weighing pros and cons and gathering information about the product in questionRandom set of thoughts3. Planning  shopping aroundDeciding “ordered steps of action” needed to make the purchase of a reality4. Implementing  buyingYou actually sit down at the computer and surf the web for the best price for the product5. Evaluating  would you re-purchase?Spend time reflecting on your outcomeFactors that influence consumersEconomicsEconomics  the condition of national and worldwide economies during times of decision makingUnemployment rateInterest ratesInflation ratesHistoryThe background history of each person influences his or her decisions. This include our own personal histories and also the histories of our familiesThe history of the area in which the person resides influences consumer decision making as wellConsumer cultureGenerally refers to patterns of human activity and the symbolic structures that give such activity significanceIt is the way people live in accordance to beliefs, language, history, or the way they dressCulture includes the groups in which an individual or family resides and their behaviors or traditionsIndividual traitsAge, eye color, hair color/type, weight heightPhysiological needsThirst, hunger, safety, housing, protectionDesire for technologyTechnology includes the methods and materials that individuals use to get what they wantIncluding machines, techniques, material objects, and processesPolitical area (government standards)Politics affect our economic decision makingPolicies impact our consumption…we have to buy auto insurance but we do not have to buy health insuranceEconomics & the Business CycleEconomics  the study of how societies use scarce resources to produce valuable commodities and distribute them among different peopleBusiness Cycle  refers to the periodic fluctuations of economic activityExpansion  prosperity, growth, high output, low unemployment, increased retail sales and housingRecession  temporary moderate decline or downturn in economy, declining output, income, employment, and trade.Usually 6 months to a yearDeep recession is called a “Depression”Recovery  when economic activity picks up, leading to expansion. Production on the rise, spending on the rise, unemployment declines, consumer confidence risesSometimes includes a rise in IRReal Gross Domestic ProductA measure of the value of all goods and services newly produced in a country during some period of time, usually one year or one quarter; adjusted for inflationInflation  the steady increase of pricesMakes the purchasing power of your dollar smallerDeflation  indicates falling pricesSupply, demand, equilibrium price, and demographicsAfter 9//11 there a huge America flag