Note 1 for CSM 401 with Professor Pentecost at UA
Note 1 for CSM 401 with Professor Pentecost at UA
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Date Created: 02/06/15
Notes Chapter 1 What is the Consumer Interest Does the consumer decide what is going to be produced set prices or decide how much of a product will be available Is the consumer KING in other words and does he make all the decisions If it is true that he does make all the decisions how does he He39s not the manufacturer so how would he make those decisions DEMAND The consumer decides what he WILL buy what he WON39T buy how much he will pay and how much he won t pay Producers can39t sell it if consumers won39t buy it Is this how it works Do consumers have all the power OR do producers decide what they39re going to make how much of it and what price they39ll get for it For instance who drives the desire for changes in the way cars look every few years Do WE want the look of our Ford to change every couple of years Or does the carmaker tell us that we need a new car because the new models make our old ones look outdated Who39s in control Consumer sovereignty is the market situation where consumers have the power to ultimately decide which products and services society will produce and consume Producer sovereignty is an alternative view that consumers are more or less at the mercy of producers marketing plans and are manipulated into consuming whatever is produced Note that there is a difference between consumer choice and consumer sovereignty EX Drivers are required to carry auto insurance and we can choose which company to use but not whether to buy We have a choice and yet are not sovereign The American economy is probably somewhere in the middle Producers do extensive market research to determine what consumers want or think they want Consumers then determine what goods remain on the market by purchasing the good Consumers DO have power dollar votes but do they hold all the power No How much power a consumer wields is directly related to how much he knows About the products he buys About producers their methods and tactics About the choices or alternatives he has This is what our book refers to as quotConsumer Sophisticationquot To have that kind of knowledge the consumer has to educate himself that is research products producers and alternative choices To educate himself a consumer has to have time Unfortunately a lot if not most consumers don39t have or don39t take the time to educate themselves The result is a lack of power for consumers and more power for producers That39s part of the goal of this course to show you the importance of educating yourself so that you39ll have power as a consumer It39s in the best interest of all consumers for us to seek fairness for ourselves The equity component of the consumer interest means ensuring access to acceptable goods and services fairness Sometimes in order to achieve this concept of equity government gets involved and adopts a quotpaternalisticquot position What does quotpaternalisticquot mean Fatherly parental As in quotIt39s for your own goodquot and quotWhether you like it or notquot and quotBecause I said soquot All those things we39ve heard our parents say sometimes government says For instance government says that we have to have Auto safety standards like it or not Can39t use a new drug like it or not This is an issue on which everyone cannot agree Just how much quotfatherlyquot intervention is needed by government Seat belt laws smoking restrictions motorcycle helmet laws Where do we draw the line Consumers are a special interest group that works to be heard by government A special interest group is A group of people with the same interest in common that assert themselves in order to have an effect on what laws are made and what political decisions are made that affect them The term quotspecial interest groupquot has taken on a negative connotation over time We think of special interest groups as being BIG MONEY or sometimes owning politicians Although some special interest groups can get out of hand OR at least politicians39 responses to them can get out of hand special interest groups are not quotbadquot by definition By each special interest group speaking up for its needs they are heard The National Rifle Association NRA is a special interest group So are abortion activists health insurance companies the tobacco industry and consumers It may be hard to envision consumers as a special interest group because the group by definition would be so large ALL of us are consumers therefore it may be difficult to think of the entire population as a special interest group We need to train ourselves to think of consumers as a special interest group Washington thinks of consumers this way and responds to them as such All special interest groups have a particular interest that they want to promote The NRA wants to be sure that citizens have the right to bear arms Abortion activists want to be sure that anyone who wants one can get an abortion A special interest group by definition IS biased towards its own special needs and that applies to consumerinterest groups as well What interest do consumers want to promote Probably low prices We all want low prices Is that the extent of the consumer interest Don t sometimes low prices go hand in hand with poor quality Do consumers want low prices at any quotcostquot Even if it means poor quality NO What would be a better position for consumers to take Probably fair quality at the lowest possible price What about safety Do we as consumers care whether or not products we buy are safe In the last few years we have seen deaths resulting from faulty tires Remember the hype regarding the PhenFen drug that would make you skinny So the consumer interest can probably best be defined as a quest for fair quality and safe products at the best possible price The consumer interest differs from the public interest It might at first seem that they39re the same because certainly every member of the public is a consumer Yet the public interest is concerned with the best interests of all members of the community Such as a safe environment fair taxes or protecting our country militarily Government functions to provide for a number of public needs national defense social welfare programs space research and state parks Most people want to receive as many public goods as possible for the lowest personal payment of these goods and services To keep people from freeriding enjoying benefits without paying the government may intervene and claim ownership when a good or service is deemed important enough to the community Then the service can be supported by government funding and tax These types of decisions that are good for everybody are decisions in the quotPublic Interestquot SOM E GOVERNMENT BIASES It39s important to know that Government approaches all of these various interests and groups and decisions with some biases And when I refer to quotgovernmentquot I mean Congress State Legislatures elected local government officials and government regulatory workers 1 Supporting competition 2 Keeping government controldecisionmaking at the local level 3 Forming solutions to problems that allow consumers as much choice as possible like rather than banning tobacco sales opting instead to put warning labels on tobacco products 4 Letting businesses use selfregulation to solve problems as much as possible rather than government mandates Sometimes though in all of this government officials do yield to special interest groups that can offer the most money to reelection campaigns However what they should do and hopefully do most of the timeis represent the public interesteven over the consumer interest where there is a conflict What are some ways the consumer interest might conflict with the public interest The example that our text gives Our interest as consumers might be a 10 loaf of bread but in order for government to insure a 10 price for us it would have to control supply and demand and subsidize bread prices ie pay the difference in cost to the bakeries That39s not in the public39s best interest Sometimes the consumer interest conflicts with itself Like when as consumers of automobiles we would benefit from the safety of airbags and yet we don39t want the cost of airbags to increase the prices we have to pay for cars Some areas where public interest decisions have helped consumers are things like nutritional labeling and quotlemon lawsquot for cars Can you think of others HOW TO PURSUE THE CONSUMER INTEREST Because consumers have specific interests that differ from the interests of other groups it is important that consumers SPEAK UP for what they need and actively pursue their objectives To do that we as consumers need to BAND TOGETHER as a group to be heard louder and clearer It is difficult for us to get much done alone and that39s why we take advantage of what our text calls quotparticipatory democracyquot That39s one way we pursue our consumer interest Another is how we cast our quotDollar Votesquot We buy things that meet our needs and expectations and refuse to buy things that fail in quality price and service Have any of you ever consciously refused to buy in order to cast a quotnoquot vote What were the circumstances EX Several upscale pet stores have sports drinks for dogs Are we such a wealthy nation that we will spend our money on Doggie Gatorade I for one refuse to purchase these beverages and would rather donate a few dollars to the Humane Society Whatever the item is what we re doing when we consciously cast those quotnoquot votes is quotBOYCO39I39I39INGquot If you do that alone it is a quotpersonal boycottquot and those do add up to have an effect Sometimes groups band together to encourage others to boycott a product or a seller Why do sellers respond to boycotts Lost sales Another is a fear of what effect controversy and negative publicity will have on the company In order to be effective consumers and cast the right quotdollar votesquot we need to be INFORMED Only a small fraction of consumers are wellinformed Those who are informed and actively pursue getting their money39s worth are called aggressive assertive consumers In addition to private citizens seeking the consumer interest there are also professional consumer advocates who make a career of it They are people who work for nonprofit organizations that monitor legislatures congress and regulatory agencies to influence public policy on behalf of consumers Ralph Nader is the most famous consumer advocate There are several Consumer Rights that have evolved into acceptance over the years mostly promoted by different presidents as part of their agendas We39ll review these in more detail in Chapter 3 but at this pointI want to introduce you to what they are Choice Info Safety Voice right to be heard Redress right to remedy Environmental health that is to be protected from damage to the environment Service courtesy responsiveness and Consumer education These are all rights that have been pretty much universally accepted not as legal rights but as moral rights Reflect on how you benefit from these Our text identifies 4 problems that consumers face when the consumer interest comes into conflict with business interest Business wants to sell goods and services at the highest price regardless of quality 1 2 3 Producers39 inability OR unwillingness to satisfy a consumer39s needs For instance perhaps a producer39s inability to incorporate safety features in a product because of the added cost to production OR maybe an unwillingness to live up to a warranty promise OR frauds in the marketplace Lack of consumer information Not only is it difficult for consumers to find the time to educate themselves but sometimes the information is simply not available EX When I went to purchase my first printer I had a difficult time I went in one of those technology stores where there were probably 100 different kinds Did I have time to read on every box No it was a nightmare Information overload Failure of the marketplace to resolve consumer grievances easily or effectively When we have a problem sometimes it is very difficult to get it resolved OR the process we have to go through can be difficult and even intimidating EX 1800wait anhour to speak to a customer service representative 4 Consumer interest underrepresented in government so that an imbalance is created among special interests to the consumer39s disadvantage The text suggests that part of the sellerconsumer conflict is that businesses who have shoddy products or who treat customers poorly will lose to competitors What do you think We have a few more concepts that we haven39t touched on yet before we leave Chapter 1 Opportunity rights Rights we have as consumers that give us an opportunity to make choices These are political or governmental actions that improve opportunities of consumers to make wise decisions We may or may not take advantage of the opportunity offered but the opportunity is available as a result of governmental action Like Nutritional labeling care labeling for clothing health and safety warnings All of this information that is legally required gives us the OPPORTUNITY to reject a product based on the information and to choose another product instead that is if we choose to take advantage of the information given us Benefit rights Benefits bestowed on a certain group of people without their having to exercise any responsibility We all BENEFIT from auto safety standards airbags for example without having to do anything to ensure that they39ll be included in the manufacture of our cars
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