FHCE 3100 Lecture 4 Outline of Last Lecture I. The Business Cycle & Supply Outline of Current Lecture II. Consumer Movement Current LectureChapter 2: The Consumer Movement Part 1 *A lot of questions on the upcoming quiz will come from this content, pay attention to the people/events/dates.  The Consumer Movement Introduction Adam Smith wrote Wealth of Nations in 1776. He said that consumers will make choices that give them the greatest amount of satisfaction. He was a proponent of the invisible hand (minimizing government intervention in the marketplace). Know who wrote what and what date and the content.  Rational Self Interest: Rational Choice Theory It is the dominant theoretical paradigm in Microeconomics  It assumes that individuals choose the best action according to stable preference functions and constraints facing them  Ex. Price could be a constraint, tied to your income Although rationality cannot be directly empirically tested, empirical tests can be conducted on some of the results derived from the models However… We know that not all consumption is rational!  Give an example of an irrational consumption decision… Ex. Binge drinking on game days Sometimes we consume because of STATUS Paris Hilton now has her own line of clothing. What woman will purchase these products? Women who care about STATUS.  Conspicuous Consumption When a person pays an extremely high price for a product for its prestige value leading to a much higher demand than a simple price/demand relationship would justify These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute. Prestige: a high standing achieved through success or influence or wealth, etc.  Law Violation!!!  Law of Demand: if nothing else changes, consumers will by a greater quantity of a product at a lower price than at a higher price Price increases, demand is supposed to decrease Charts will be on exam, know chart for this ^  The Consumer Movement Introduction The US was founded on the free market system, however, by the late 19th century (1800s) _________ we are in the 21st century right now A Monopoly  Is defined as a persistent market situation where there is only one provider of a product or service, in other words a firm that has no competitors in its industry Do not protect consumers Take choice out of consumer’s hands Do not have to provide good/safe/equitable products… 1880s Monopolies Railroads (Pacific Railway Company) Farmers being “railroaded” into using certain lines Telephones (American Bell Telephone…renamed AT&T in 1899) The Consumer Movement defined: Policies aimed at regulating products, services, methods and standards of manufacture, selling, advertising in the interests of the buyer  Consumer activists demanded safe, reasonably priced, and accurately labeled products, along with the right to complain and be satisfied with products Examples of at-risk consumers: Elderly At risk in the market place b/c they can be taken advantage of, don’t realize about fraud, could be computer illiterate, they are targets Youth We are inexperienced, may not be as trusting as elderly but not enough life experience to know good deal v. bad deal Poor Limited resources, someone always poorer, ex) someone stole tennis shoes off homeless man  Rich How do we protect consumers? Through consumer policies Government sponsored policies Through education Education is a key tool to prevent consumer injury Background “Primary goal of the movement is to advance efficiency and equity in the marketplace” (Herrmann & Mayer, pp.584) Equity meaning some not having the same opportunities as others The Movement Contains:  People who are motivated by economic issues and seek benefits for themselves  Ex. Insurance companies People who are guided by moral concerns and pursue benefits for others Ex. Mother’s Against Drunk Drivers, are not try to get wealth but trying to protect your life, have helped spearhead the raise of drinking age, understand impact this organization has had on us (^) and BAC level (.08)-it used to be .1 Consumer Movement is… Diverse in goals, levels of commitment, and social backgrounds of participants  Exhibits diversity in leadership Demographics  Preferred tactics and strategies  Ideology—individual responsibility vs. protection (liquor laws, smoking)  Anti-government vs. pro-government  Ralph Nader “Unsafe at Any Speed”  Detailing his claims of resistance by car manufacturers to the introduction of safety features  So they put in the seatbelts, well really “lap belts” but now law enforcing that you wear it Esther Peterson Worker’s rights  Equal pay for equal work  Truth in advertising Nutrition labels and “sell before” labels for food products Needs to be at a 6th grade reading level  Economic Regulation v. Social Regulation “Economic regulations” regulate the price, entry, exit, & service of an industry Ex. Gasoline, long distance telephone prices  “Social regulations” address health, safety, employment fairness, environmental quality, and other non-economic questions Ex. Job discrimination, clean water/air acts  These groups tie together…ex) drinking age goes down to 18 so alcohol is purchased more (good for economic regulation) but then birth rate goes up because of young people drinking alcohol (bad for social regulation)  Two Specific At Risk Groups Women Children  Women’s Movement 1837: Young teacher Susan B. Anthony asked for equal pay for women teachers The first women’s rights meeting in the US, held at Seneca Falls, New York, in 1848, itself followed several decades of a quietly emerging egalitarian spirit among women  Met in NY because bulk of women living on east coast, NY as the hub  Susan B. Anthony Was a prominent American Civil Rights leader who played a pivotal role in the 19th century Women’s rights movement to introduce women’s suffrage to US Already on the books:  She said the 14 th amendment says we don’t need to fight for women’s rights and right to vote because the constitution already says so , “nor deny to any person within its jurisdiction the equal protection of the