Role of a Consumer in a Free Enterprise System Mrs. Wilson Career & College Prep Rocky Point High School
Quick Review • Our economy is which of the following? • Command • Traditional • Market/Capitalism • What are producers? • What are consumers? • Complete this sentence… • Everyone is a ______________. (producer/consumer)
Quick Review • What is the basic economic problem referred to that means that consumer’s wants are unlimited and that resources are limited? • What is the quantity of goods and services that producers are willing and able to provide?
Quick Review • What is the willingness and ability of consumers to purchase goods and services at certain prices? • What does the term “equilibrium price” mean?
Utility • This is the term economists use to describe the satisfaction consumers receive from using or owning a good or service • For example, owning in-line skates may bring a particular consumer twice as many “utils” as owning a bicycle
Consumer Power • The consumer has the ultimate power in a free enterprise system • Buying decisions direct the production of goods and services • Determine what will be produced and at what price • When buying, they are casting $$ votes for its continued production
Producer Power • They ALSO have power in a free enterprise system • They use advertising and other marketing strategies to induce consumers to want products • Advertising • Communication of product information through mass media to increase demand • Informative and give facts • Can be false and misleading
Parts of aFree Enterprise System INFORMED CONSUMERS COMPETITION PURCHASINGPOWER
Competition • Rivalry among sellers • Occurs when there is more than one seller of a good or service • Monopoly only one seller • Price Fixing is an illegal agreement among competitors to sell a good or product at a set price
Competition • Healthy competition keeps prices down • Sometimes the government will grant a monopoly • One power company (LIPA/CON ED) to serve a geographic area • Governments regulate to avoid “gouging”
Questions… • Do you buy American products first? • Why or why not? • Do you agree that consumers have the right to purchase the best value, regardless of who makes the product? • Why or why not?
Purchasing Power • The value of money, measured in the amount of goods or services it can buy • Purchasing power goes up & down with the economy
Purchasing Power • Inflation • When prices are generally rising in the economy, purchasing power decreases • Recession • When production, employment and income are declining. People lose their jobs cannot buy as many goods. • Overall loss to our purchasing power in the economy
Purchasing Power • Transfer payments • Government shifts purchasing power my making these payments • Government grants to some citizens paid with money collected from other citizens • Can you name some?
Informed Consumers • You should know your rights and responsibilities in the marketplace • When consumers make wise decisions, they system works to weed out inferior products and keep prices at an acceptable level • When consumers do not act responsibly, prices increase
What would you do if you received a pay raise or earned an increase in allowance? Question…
Three Basic Economic Questions • What will be produced? • What the people want • By whom will it be produced? • Entrepreneurs • For whom will it be produced? • People who can afford it
Review… • Tell me one thing that you remember from today’s presentation on our economy • Don’t forget to raise your hand!