EPF10a. Examine basic economic concepts and their relation to product prices and consumer spendingEPF10c. Describe the steps in making a purchase decision EPF10d. Determine the consequences of conspicuous consumption EPF10h. Examine the impact of advertising & marketing on consumer demand and decision-making in the global marketplace
Basic economic concepts can be used to understand pricing ofproducts.Basic economic concepts can be used to understand consumerspending.
What economic concepts impactconsumers? Profit is an incentive for producers. Businesses produce what consumers demand, a concept known as consumer sovereignty. If the cost of production goes up, supply will decrease and prices will rise; if the cost of production goes down, supply will increase and prices will fall. An increase in productivity lowers the cost of production and thus increases supply, leading to a decrease in price. Competition among businesses affects consumer prices.
What economic concepts can be usedto understand consumer spending? Changes in income affect the demand for goods and services; an increase in income increases demand for most products, and vice versa. Interest income is an incentive to save money. Supply and demand for a product or service determine price.
Purchase decisions are made more easily when marginal benefitand marginal cost are considered.The use of decision models can improve purchase decision-making.
What are marginal costs and marginalbenefits?Marginal benefits are the additional benefits of consuming one more of something.Marginal costs are the additional costs (i.e., what one must give up) of getting one more.For example, the marginal benefit of buying one more pair of jeans might be the time saved by having to wash jeans less frequently. The marginal cost of one more pair of jeans might be giving up buying a new shirt or pair of shoes.
How does one weigh marginal costsand benefits when making adecision?Sample Decision Model (PACED) Step 1: Determine the problem. Step 2: List the alternatives. Step 3: Establish criteria. Step 4: Evaluate each alternative according to the criteria. Step 5: Decide.
How can a decision model improve decision-making?What other steps could improve purchasingdecisions? researching prices for commonly purchased items using comparison shopping weighing the pros and cons of sales incentives, guarantees, warranties, and rebates understanding sales terminology planning purchases and avoiding impulse buying computing unit prices reading labels reading contracts computing total costs checking references of businesses patronizing reputable businesses.
Conspicuous consumption can lead to financial troubles.
What is conspicuous consumptionand how can it lead to financialproblems? Conspicuous consumption refers to buying goods and services not for their intrinsic value but for the purpose of impressing others in hopes of improving one’s social status. Conspicuous consumption can lead to spending beyond one’s means. This requires borrowing, and excessive borrowing can lead to credit problems.
Advertising and marketing affect consumer demand anddecision-making.
How do advertising and marketingaffect consumer demand anddecision-making?Advertising features may have features that may be misleading (e.g., infomercials, celebrity endorsements).