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Consumerism. UNIT IV. Disposable and Discretionary Income. Consumer - a person or group who buys or uses goods and services to satisfy needs/want Disposable income- $ to spend or save after taxes have been paid. Discretionary Income- money to be spent after necessities have been bought

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disposable and discretionary income
Disposable and Discretionary Income
  • Consumer- a person or group who buys or uses goods and services to satisfy needs/want
  • Disposable income- $ to spend or save after taxes have been paid.
  • Discretionary Income- money to be spent after necessities have been bought
  • What two things can a person do with discretionary income????
decisions for consumers
Decisions for Consumers
  • Consumer decisions involve comparing available alternatives.
  • You must consider:
  • Opportunity cost- value of the highest alternative choice that you did not make.
  • Rational Choice- choosing the alternative that has the greatest value from among comparable-quality products.
  • Scarce resources- income and time need to be considered; time is for researching a product.
saving or spending
Saving or Spending
  • Individually:
  • List two things you spend money on regularly with discretionary income.
  • List two things you long term save for with discretionary Income.
  • Assess why you choose to spend money for certain things or save for certain things.
consumer journal
Consumer Journal
  • In this project, you will learn the steps of making a major purchase, including researching and comparison pricing. You will create a consumer journal to document your research and conclusions.
  • DECIDING WHAT TO LOOK FOR: In groups you will make a list of features you would look for in making a major purchase.
step 1 instructions
Step 1 Instructions
  • Individually choose one item you would save for out of:
  • Car
  • Hand held technology (i-pod, i-phone, smart phone, tablet, i-pad, etc.)
  • Technology system (computer, laptop, gaming system)
  • Educational (college, musical instrument, trade school)
  • Come up with a list of features you consider before purchasing this make or model
  • Write a description of each of the features’ importance
  • Rank these features by importance
consumer journal part 2
Consumer Journal Part 2
  • Step 2: GATHERING INFORMATION
  • You will look for information that will help find products with features that match the product features you wish for.
  • Look for advertisements on the internet/magazines to find brands to research.
  • Compare advertisements with your group.
  • Rank products based on your feature list from step 1.
  • Present your product advertisement and feature list to the class.
consumer rights
Consumer Rights
  • Consumerism- movement to educate buyers about the purchases they make and to demand better and safer products from manufacturers.
  • 1962 JFK outlined four major rights:
  • Right to safety
  • Right to be informed
  • Right to choose
  • Right to be heard
  • (added by Nixon) Right to redress- compensation for damages caused by products
americans and credit
Americans and Credit
  • Credit- receipt of funds either directly or indirectly to buy goods and services in the present with the promise to pay them in the future.
  • Principal- amount originally borrowed in the loan.
  • Interest- amount the borrower must pay for the use of someone else’s funds
  • Installment debt- type of loan repaid with equal payments or installments over a specific period of time.
  • Durable goods- items with a life of more than 3 years.
  • Mortgage- Installment debts owed on houses, buildings or land.
why do people use credit
Why do people use credit?
  • It allows consumers to enjoy something now rather than later.
  • Checklist for buying on credit:
  • Do I really require this item? Can I wait?
  • If I pay cash, what am I giving up?
  • Is the satisfaction from the item worth the interest?
  • Have I done comparison shopping for credit?
  • Can I afford to use credit now?
types of financial institution
Types of Financial Institution
  • Commercial Bank- Main functions are to accept deposits, lend funds and transfer funds among banks, individuals and businesses.
  • Savings and Loan- depository institution that accepts deposits and lends funds.
  • Savings bank- depository institution originally set up to serve savers overlooked by commercial banks
  • Credit Unions- owned and operated by its members to provide savings accounts and low interest loans to only their members
  • Finance company- takes over contracts for installment debts from stores and adds a fee for collecting the debt
charge accounts and credit cards
Charge accounts and credit cards
  • Charge account- account for a particular store allowing consumers to buy on credit
  • Credit card- charge purchases from anywhere to a company and pay them back plus interest
  • Finance charge- cost of credit expressed monthly in dollars
  • Annual percentage rate (APR)- cost of credit’s interest in yearly percentage amount.
will you be able to get credit
Will you be able to get credit?
  • Credit Bureau- private business that investigates a person to determine the risk involved in lending to that person.
  • Credit check- investigation of a person’s income, current debts, personal life, and past borrowing and repaying history.
  • WHY WOULD A PERSON GET A BAD/GOOD CREDIT RATING?
  • Credit rating- rating of the risk involved in lending to a person or business.
  • Can you name any companies that advertise this topic?
  • Explain why YOUR CREDIT SCORE MATTERS?
  • Collateral- Something of value that a borrower lets a lender claim if loan is not repaid
  • Secure loan- backed up by collateral
  • Unsecure loan- guaranteed by a promise to repay it
laws protecting you
Laws Protecting You
  • “Truth in Lending Act” and “Equal Credit Opportunity Act” are a few of many laws protecting you and your ability to borrow $
  • Usury Law- law restricting the amount of interest that can be charged for credit.
  • Bankruptcy- the state of legally having been declared unable to pay off debts owed with available income; remains on your credit for 10 years; should be a last resort.
  • WHEN WOULD YOU HAVE TO USE BANKRUPTCY?
get out your book
GET OUT YOUR BOOK
  • Open to page 111
  • Do numbers 23-25 & 29 in partners.
  • #23 20 months
  • #24 Interest charges add to the balance each month so it takes longer to pay
  • #25 This is the total of interest charges over the 35 month period it took to pay off the debt; cost of borrowing the money
  • #29
  • The interest almost is 2X as high as regular
  • Try to attract new customers
  • Card B
  • Under most circumstances, card A would be the best but depends
  • Average balance; if the balance was $5,000 card B would be better