Understanding Consumer Decisions: Income, Choices, and Strategies for Smart Buying
This chapter explores the vital role of consumers in economic decision-making. It delves into key concepts such as disposable and discretionary income—fundamental to understanding personal spending capabilities. Consumers face choices influenced by scarce resources and opportunity costs when deciding whether to make a purchase. Additionally, the chapter highlights effective buying strategies, including how to gather information, the impact of advertising, and the importance of making informed choices. By applying these principles, consumers can make more rational and beneficial purchasing decisions.
Understanding Consumer Decisions: Income, Choices, and Strategies for Smart Buying
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Presentation Transcript
Chapter 3 Your Role as a Consumer*
Section 1 Consumption, Income, and Decision Making
Consumption, Income, and Decision Making* • Consumer • Any person or group that buys or uses goods and services to satisfy personal needs and wants*
Disposable and Discretionary Income • Disposable income • Income remaining for a person to spend or save after all taxes have been paid
Disposable and Discretionary Income • Discretionary income • Money income a person has left to spend on extra after necessities have been bought*
Decision Making as a Consumer • The first decision a consumer must make • Whether to buy an item or not* • The 3 parts to making a consumer decision • Scarce Resources • Opportunity Cost • Rational Choice
Decision Making as a Consumer • Scarce Resources • Two scarce resources are involved after you have decided to make a purchase: • Income • Time*
Decision Making as a Consumer • Opportunity Cost • The value of your highest alternative choice that you did not make
Decision Making as a Consumer • Rational Choice • Choosing the alternative that has the greatest value from among comparable quality products
Section 2 Buying Principles or Strategies*
Gathering Information • How Much Information Do You Need • It cost TIME to gather info • decide how much time to spend getting info • get only as much info as is worthwhile
Gathering Information • Developing a Consumer Knowledge Base • information you get from buying one product, can be used when buying another item later • a skill you can acquire and sharpen is getting salespeople to give you accurate info. • you can get a lot of info in a short time on the internet
Using Advertising Wisely • Competitive Advertising* • ads that attempt to persuade consumers that a product is different from and superior to any other • purpose is to take customers away from competitors or keep competitors from taking customers
Using Advertising Wisely • Competitive ads also appeal to people’s emotions • Informative Advertising • benefits consumers by giving information about a product • you can learn existence, price, quality, and special features of a product • could be competitive
Using Advertising Wisely • Bait and Switch • One of the most widely used methods of deceptive advertising • attracts consumers with low-priced product, then tries to sell them a higher-priced product • This practice is deceptive and illegal*
