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by: Hershel Bogan


Hershel Bogan
Texas State
GPA 3.99

J. Allen

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J. Allen
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This 38 page Class Notes was uploaded by Hershel Bogan on Wednesday September 23, 2015. The Class Notes belongs to FCS 1341 at Texas State University taught by J. Allen in Fall. Since its upload, it has received 14 views. For similar materials see /class/212905/fcs-1341-texas-state-university in Family and Child Sciences at Texas State University.

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Date Created: 09/23/15
CONSUMERS IN THE MARKETPLACE EXAM 1 quot Economic Systems quot What is the basic purpose for any economic system 0 To exchange goods and services What are the three questions any economic system must answer 0 What do we need 0 How much 0 For whom Who are the three entities that can answer the above 39 quot 0 Government 0 Businesses 0 Consumers What is the difference between a llMarket System and llCentral Planningquot economic system 0 Market System 0 Consumer is sovereign 0 Consumer independently tells businesses what they want by buying 0 No outside pressure no marketing 0 Central Planning 0 Government answers questions 0 Government decides what and how much a business can produce 0 Similar to quotsocialismquot o The US is somewhere in the middle What does Consumer 39 mean 0 llThe consumer as ruler 0 Meeting the consumer s need is the only important function of an economy Categories of Businesses Type Type Entry Producers 1 24 Pure Competition 0 The more competition that exists the lower the prices 0 quotPure competition has lowest prices 0 23 of US businesses are part of the oligopoly Not very much competition after all quot Consumer Movement quot Era 1 0 18801917 Era 2 Safety Problems 0 Food and drug industry 0 Rural to urban movement causing decrease in farming increase in consumerism Economy 0 1880 Sherman AntiTrust Act 0 Prevented monopolies 0 First law to protect consumers Strong Consumer Advocates 0 Dr Harvey Wiley I llfather of consumerism I aimed to protect against over processing 0 Upton Sinclair I The Jungle meat packing industry I caused outrage with public led to 2 laws in 6 months Significant Consumer Legislation 0 1906 Meat Inspection Act I Protection during processing I Result of The Jungle 0 1906 Food and Drug Act I Protection during production transportation and sale of foods drugs and meds o 1912 Better Business Bureau formed I Businesses that promote good business practices I Effort to protect consumers with more information o 1913 Federal Trade Commission Act I Created the Federal Trade Commission with many responsibilities I To ensure competition in the marketplace I Now regulates for fair advertising End ofera o WWI followed by prosperity in the 1920s 19291940 Began with stock market crash of 1929 Consumer Advocates 0 FJ Schlink I Wrote One Million Guinea Pigs I Said companies were testing food and drugs on consumers I Caused public outcry 0 Consumers Research I Magazine first published in 1929 I Tested products and shared results with consumers o Colton Warne I Cofounder of Consumers Union I After leaving Consumer Research I Consumers Union and Consumers Report magazine tested products 0 US President 0 Roosevelt great consumer advocate 0 Safety Issues 0 Elixir sulfanilamide I OTC cough medicine that killed several leading to public outcry 0 Significant Legislation 0 1938 Food Drug and Cosmetic Act I Strengthened Food and Drug Act I Has to be proven to be safe and effective before being sold I FDA approval needed 0 End of era WWII Between Era 2 and Era 3 o No major consumer laws passes 0 Laws prior to 1960 0 Result of scandals 0 Protection up to llpoint of purchase 0 Between 196575 twice as many consumer laws passed as previous 90 years M 0 Late 1950s1980 0 Safety Issues 0 Cranberry scare pesticides causing cancer 0 Thalidomide scare morning sickness drug affecting arms and legs of babies in EU Complexity of Marketplace 0 Increase of new products 0 More impersonal o Repairing products 0 Consumers feel frustrated and helpless Consumer Advocates o Vance Packard I Wrote The Hidden Persuaders I About marketing and how unaware of it we are 0 Ralph Nader I Wrote Unsafe at Any Speed Complained to GM about refusing to fix car flaw I Then stood up against airline bumping I Won against big lawsuits twice 0 US Presidents 0 President Kennedy consumer rights 0 President Johnson Office of Consumer Affairs 0 President Ford right to consumer education 0 President Carter advocate for Consumer Protection Agency 0 Legislation 0 Food Drug and Cosmetic Act amended MagnusonMoss Warranty Law Airline bumping laws Truth in lending for credit OOO Fair Credit Reporting Act 0 Equal Credit Opportunity Act 0 End of era 0 Defeat of Consumer Protection Agency combined agencies 0 US becoming more conservative 0 Election of President Reagan Era 4 1980 to Today 0 Significant safety issues Yes 0 Weak economy Yes 0 President as Consumer Advocate Now yes 0 Strong Consumer Advocates Noonly small ones 0 Significant consumer legislation passed Yes Original Consumer Rights 0 By President Kennedy 0 Consumer Rights brought to Congress 0 Right to be informed 0 Right to safety 0 Right to choose competition more accurately 0 Right to be heard though we don t use it enough Additional Consumer Rights 0 By President Johnson 0 Right to decent environment 0 By President Ford 0 Right to Consumer Education 0 We shouldn t have to learn from mistakes 0 By Consumer Representatives 0 Right of Redress 0 Right after point of purchase Consumer Responsibilities 0 To be aware of role and function of the economy 0 To preform role effectively 0 To be alert informed responsible consumer 0 To exercise independence ofjudgment and action To avoid wasting resources To avoid exploitation of workers To be honest in dealings To protect when appropriate 0 To report wrongs incurred in consumer dealings To communicate with producers and businesses and the government To accept consequences of consumer decisions To report defective goods to both the seller and the manufacturer PROBLEMS 0 Time consuming o Impossible to do all of the time so try especially with large purchases quot Advertising quot What is the purpose of advertising 0 To grab our attention 0 To make us buy Who ultimately pays for advertising How 0 The consumer o By buying their product The Top 10 national advertisers can be 39 Ias what type of business o OLIGOPOLY CategoriesF39 of Advertisements o Informative 0 Comparative 0 Ex ATampT v Verizon problem is what is NOT said about product 0 DefensiveCompetitive 0 Main focus is brand recognition 0 Seen most often 0 Least informative Do ads stimulate or reduce 0 National level 0 Decrease 0 Because of the oligopoly of top companies 0 Local level 0 Stimulates 0 Because ads are between stores trying to push sales 39 39 39 39 of Advertisers and the Content of the Media in which they are advertising o A LOT 0 Advertisers pay media to advertise gt free tv newspaper etc 0 But ads can pull funding if media advertises negative story or something they disagree with Deceptive Advertising 0 Bait and Switch Ads 0 Put something on sale but run out quickly to try to get you to buy something else more expensive 0 Illegal but hard to prove 0 Law if item is advertised they must have enough for reasonable amount of buyers I Unless lllimited qualityquot is on ad 0 Some offer to replace sale item with something else of equal value 0 llSins of Omissionquot 0 Leaving something important out on purpose 0 Misleading statements 0 Ex llgoing out of business 0 Puffery o Slogan in competitive ads 0 Illegal but also hard to prove Federal Regulation 0 Done by FI39C 0 Ads not checked for accuracy before release 0 Get pulled because of complaints most often from the competitor 0 Do they control the pricing of ads Testimonials 0 Famous people using products 0 Rule person has to use the product 0 Are regulated 0 Very effective Corrective Advertising 0 FTC can ask company to release corrective ad 0 Company has to apologize and say the real truth 0 Hard to correct misconceptions not usually successful Consumers in the Marketplace Exam 2 Study Guide FRAUD AND DE CE PTION What is the difference between fraud and deception 0 Fraud deception deceit trickery an INTENTIONAL perversion of the truth 0 Deception to deceive to mislead to delude or to cheat What is the difference between Caveat Emptor and Caveat Venditor o Caveat Emptor llbuyer bewarequot consumer to watch out for deception o Caveat Venditor quotseller bewarequot companies should watch out for informed consumers Price Fixing o Businessesproducers collectively decide to set prices higher than they would be in normal competition 0 Eliminates competition raises prices 0 ILLEGAL Have to be able to prove that the businesses have conspired 0 Problem that the consumer has least information about 0 Legislation the Sherman Antitrust Act Healtthedical o Unnecessary surgeries I 39 39 quot39 39 39 39 and gall bladder removal 0 False medical practices 0 Fee splitting a payment from one doc to another for referring a client 0 False health claims 0 Warning signs 0 llquick and painless cure advertised Secret special foreign or ancient formula Available only by mail or one supplier Testimonials or case histories only documentation Promoted as effective for a variety of conditions Scientific breakthrough or miracle held back by government or medical community o Is it too good to be true 0 Quackery making a lot of noise about nothing ex blatant selfpromotion Beauty 0 Weight loss plans 0 Ads are not regulated 9 over half contain false statements 0 Generate 59 billion in sales 0 1 surgical method for men and women liposuction o 1 nonsurgical method for men and women botox 0 Red flags in diet ads 0 Testimonials Before and after pictures Rapid weight loss claims No diet or exercise required Clinically proven but no doctordoctor approved claims 00000 O O O O 0 Natural safe weight loss claims 0 Tanning deceptions o TX law under 18 must have parental approval illegal under 165 yrs 0 21 states restrict tanning for minors o 10 of all Americans have used tanning beds 0 Beauty cosmetic surgeries o 10 million surgeries in 2008 0 From 19972008 9 162 increase 0 Men and beauty 0 Baldness insecurity 0 Sexual enhancement products 0 Consumer protection is very difficult because there are so many 0 Products can be pulled if dangerous Automobiles 0 Used cars 0 Mileage 1 factor for determining quality of a car 0 Odometer tampering ILLEGAL but might happen 1 in 4 sold with incorrect mileage I Made illegal by Motor Vehicle Information and Cost Savings Act 0 New cars 0 High balling salesman offers high tradein price in order to sell an artificially high priced product or service 0 Low balling salesman offers unrealized price for good or service that will not be honored o Bushing salesman adds unordered products or services to the final price 0 Misuse of personal credit information o Repairing Cars 0 Minor repairs I 75 or down I Can convince you that you need something else down when you don t 0 Major repairs I Dealerships not necessarily better than smaller places 0 Watched by National Institute for Automotive Service Excellence Land Sales 0 Intrastate 0 Within the state 0 Go listen to presentation 9get a gift but not a good one usually 0 Don t usually get the prize you think you ll get 0 Have to spend 24 hours there 0 Interstate 0 Between states 0 Selling land that isn t what they say it is 0 Count of the fact that you won t travel to see the land before buying 0 Check with Dept of Housing and Urban Development Pyramid Sales 0 Mailings that multiply quickly 0 Ask you to send small amount also sent out to millions of others asking the same 0 Person at top is the only one who gets anything back quotFreequot Ex Bernie Maddof Very misused Means you shouldn t have to pay anything at all Identity Theft When someone takes your name and buys products or opens accounts with it Victims O O The individuals not held responsible for payment but time consuming and hard to get cleared off credit report The businesses don t get paid for quotstolenquot goods How It Happens O O O 0 How to 0 Spa OOOOBOOOOOOOOOOO Credit card stolen Through the mail Internet Trash dumpster diving Prevent t Check financial statements regularly Check credit reports annually Protect your social security number Carry only essential information Check information on checks Carry only 1 credit card Buy crosscut shredder Remove mail promptly from mailbox Watch credit cards when making purchase Be aware on unusual ATMs Protect computers Information on telephone Anything coming to you that you didn t ask for Over 24 billion scam messages sent everyday Most are deceptive hard to police Legislation very weak I If you send spam have to label as spam I 33 states have something to protect us but not easy Tips to avoid spam I Do not buy anything promoted by spam I Have 2 email accounts I Use filters and firewalls I Report Phishing O 0 Not selling really more just asking for personal info How to avoid I Be wary of suspicious emails or urgent requests I Don t use links in emails use on card to call company I Use secure websites https I Log onto accounts regularly I Report What rights state and federal do have 39 39 39 o Fraudulent use of the telephone to sell a wide range of products and services 0 Your right to be able to be put on a llno callquot list national and local What is the difference between the state and federal llno callquot list Would it be better for the consumer to signup for the state list the federal list or both lists Why Will this stop all telemarketing calls Why or why not 0 National restricts the time of day the calls can occur 8 AM to 9 PM okay 0 Legislation requires that it must be disclosed at the beginning of the call 0 National companies can call even if you re on a list for 2 years if you ve had a relationship with them Be able to recognize common types of nternetTelemarketingMail Frauds o Pigeon Drop 0 Pairs working together to trick person into giving them money I Lottery ticket take out money in llgood faith then disappear 0 Bank Examiner s Scheme 0 Ask people to take out money to mark so that they can tell discover embezzelling o SweepstakesContests Lottery o CharitiesReligious scams 0 Job scams 0 Credit card scams 0 Nigerian money scams 0 Area codes 809 284 876 0 Out of country will charge account 0 72 13 digit code 0 Forwards call to third party 0 Auctionsitems for sal 0 Fake check claims cashier s check 0 Cramming 0 Extras onto account for no reason 0 Ex telephone bills 0 Moving scams CONSUMER PROTECTION What is the difference between a mediator and arbitrator Which may be binding on the parties 0 Mediator may not be binding for either party can t make you do anything 0 Arbitrator one or both parties agree that arbitrator ruling is final 0 Best when not binding on the consumer III 5 Describe how the Better Business Bureau can help consumers What is the purpose of the Better Business Bureau How much ower does the Better Business Bureau have over businesses members and nonmembers of the BBB 0 Business that promotes good business standards 0 Been around for over 100 years 0 Organization supported by businesses 0 BBB approved businesses agree to respond to all consumers that complain to the BBB 0 Provides BBB mediation for businesses and consumers o Takes consumer compaints o 270 around the country 0 No enforcement power but influence power 0 Also give info about charities Explain the purpose and how Small Claims Court works What court hears Small Claims cases What is the maximum amount that can be awarded in Texas o In every state 0 Allows consumers to go to court without an attorney 0 Takes place in Justice of the Peace court where the person is that you are suing 0 To file lt 100 0 Max amount 10000 0 Can sue for monetary damages 0 Less than a month to from file to court date 0 Won t necessarily get what you need according to the judge 0 Can then put judgment that stays on credit for 7 years o If they don t show you win 0 Can requestjury person who requests pays forjury What state agency is responsible for consumer protection What is the name of the consumer 39 law that the agency is quot 39 for enforcing o Attorney General s Office 0 Responsible for consumer protection on the state level Current Greg Abbott Responsible for the laws protecting us Can make complaints to them If complaints mount then state of TX files suit against the business O O O 0 Consumer of the following agencies 0 Federal Trade Commission 0 Responsibility to enforce consumer protection laws against any illegal acts that are deemed unfair methods of competition or unfair or deceptive trade practices 0 Established by FTC Act of 1914 o Deceptive ads made violation of federal law 0 Strengthened by MagnusonMoss Warranty Act I Reaffirmed its authority to promulgate trade regulation rules I Provided funds to allow for public participation in FTC hearings I Could enforce its rulings now without Dept ofJustice I Enabled them to seek consumer redress and civil penalties for rule violations Reviews complaint letters Conduct investigations Take court action Educate consumers Promulgating trade regulation rules Does not act on individual complaints 0 Trade regulations rules developed by state and federal agencies defining and prohibiting various industry activities 0 Food and Drug Administration 0 Basic responsibility to assure the safety and efficacy of food drugs and cosmetics Signed Meat Inspection Act and Food and Drug Act Along with FTC most influential federal agencies designed to protect consumers Food Drug Cosmetic Act of 1938 Delaney Clause Color Additive Amendment Developed product safety program 0 Fair Packaging and Labeling Act of 1966 0 United States Department of Agriculture 0 Responsibility to assure consumers that food is safe clean nutritious and attractive o Inspects meat 0 Early mover in the field of consumer services 0 USDA Extension Home Economist 000000 I Help consumers improve their nutrition money management use of credit budgeting and family relations 0 Consumer Product Safety Commission 0 Basic responsibility of protecting consumers against injuries associated with consumer products To assist in 39 39 g the r 39 safety of products To develop uniform standards for consumer products To minimize conflicts in state and local regulations To promote research and investigations into the causes and the prevention of product related deaths illness and injuries 0 Oversees I flammable fabrics act I The Poison Prevention Packaging Act I The Federal Hazardous Substances Act I Refrigerator Safety Act 0 Jurisdiction over thousands of different products plants and retail establishments I Not foods drugs cosmetics medical devices alcohol tobacco vehicles firearms boats pesticides aircraft 0 Issues recalls for unsafe products as result of death or injury 0 United States Postal Service 0 Independent federal establishment o Responsible for mail delivery 0 LOCAL level handles complaints and mail fraud allegations OOOO MONEY MANAGEMENT What is the purpose of money 0 Provides direction for spending goal based 0 Helps you to know where your money is being spent 0 Helps to make decision about spending can I afford it 0 Can increase savings 0 Helps prevent impulse spending 0 Provides security in case of emergencies 0 Provides llpeace of mind Terms 0 Money income the dollars or cents you have to spend 0 Real income the goods and services you spent your money income on o Psychic income the satisfaction you get from using your real income WE WANT OUR MONEY INCOME TO BUY REAL INCOME THAT GIVES US HIGH PSYCHIC INCOME 0 Gross income your income before taxes 0 NetDisposable income income after taxes what you actually have to dispose of o Discretionary income income left after llhave toquot bills only one to make decisions about 0 Fixed expenses expenses you have to pay but always same amount ex rent 0 Flexible expenses expenses you can affect and conserve ex food utilities 0 Scarcity limited resource not enough of it 0 Trade offs Opportunity costs when money is spent it s gone have to go without something else later What are the steps in Money Management Define your goals Identify and analyze your income Make the financial plan Put the plan into action Control spending what will you give up Evaluate How does one make a Financial Plan step 3 of Money Management What are some of the advantages of having a Financial Plan 1 Determine spending categories1012 recommended 2 Allocate money to each category a Based on government recommendations or RECORD KEEPING b Allow for irregular expenditures 3 Balance expenditures with income 4 Check and see if the plan has a reasonable chance of success What is an effective way to determine how much money to allocate each month to quotirregularquot expenditures 0 Based on record keeping What is the purpose of record keeping Why is record keeping important for good financial planninmeoney management 0 Purpose helps you to allocate money to each category 0 Have to know where your money is going before you can try to fix it P P PWNquot INFLATION Define Inflation o TOO MUCH MONEY CHASING TOO FEW GOODS 0 Solution increase the goods decrease money in circulation During inflation what isI 39 to the value of the dollar 39 39 power 0 Purchasing power decreases loses value o It can now buy less than it used to What are the three quottoolsquot available to government to control inflation How should the tools be used in a recession 0 Controls 0 Ex Nixon in 1971 froze prices and incomes 0 Inflation was suppressed not difussed o Businesses shipped more overseas cut production at home 0 Government should use controls to spend less and lower taxes 0 Fiscal policy 0 Deals with taxing and spending 0 In inflation government should spend less and increase taxes 0 In recession government should spend more and lower taxes 0 Monetary policy 0 Federal Reserve Board controls money in circulation o In inflation government should raise interest rates 0 In recession government should lower interest rates Which government agency is quot 39 for Monetary Policy 0 Federal Reserve Board What is the Consumer Price Index What does it measure Who is responsible for calculating and publishing the Consumer Price Index How often is it published 0 Number that shows inflation 0 Done monthly tells of the previous month at the end of the month 0 Surveys prices of goods and services goods and services in the market basket Be able to interpret the Consumer Price Index what it means to in terms of costsdollars O 0 What is the base year Why is the base year important 0 The year to compare it to 0 Base year 100 How may inflation affect the qualityquantity of products 0 May cause companies to lower the quality of their product to save money 0 Less quantity will be produced 0 Change in packaging sizes may occur to hide it from the consumer Why does inflation make it difficult to make plans for the future 0 It is harder to predict what your money will be worth and how much you need to retire with Why may individuals be underinsured as the result of inflation o Policies when purchased are adequate but inflation means their adequate amount is not worth as much unless taken into account and adjusted yearly What do need to be aware of concerning their savingsquot during periods of high inflation 0 Value of dollar is eroding on their savingsnot worth it During a time period of inflation what does the want to do 0 Saving money save more money or save less SAVE MORE 0 Using Credit use credit more or use credit less USE CREDIT LESS During a time period of inflation what should consumers do concerning 0 Saving money save more money or save less SAVE LESS 0 Using Credit use credit more or use credit less USE CREDIT MORE Be able to use the Rule of 72 to determine 1 how long it would take to cut the buying power of a dollar in half a 72 inflation rate 2 how long it would take to double the value of an investment a 72 interest rate FINAL REVIEW FCS 1341 CONSUMERS IN THE MARKETPLACE ECONOMIC SYSTEMS 0 What is the basic purpose of any economic system 0 The purpose of the economy is to provide these goods and service food shelter clothing and material goods What are the three questions any economic system must answer 0 what should you produce 0 how much do you need to produce 0 Amount of people for whom do you need to produce Child man woman 0 What three entities that can answer the above questions In the United States who answers the three questions 0 government 0 business 0 Consumers 0 What is the difference between an economic system that is classified as a quotMarket System vs a systems classified as quotCentral Planning How is the US classified 0 Market system PURE consumer makes the decisions what how whom Consumer is sovereign and rules without interference 0 Central planning government answers questions independently consumers and businesses have absolutely no say 0 US is in the middle of market and central planning systems 0 What does Consumer Sovereignty mean 0 The consumer is kingiteralyI the idea that satisfying the consumers need is the only important function of an economy What are the 4 possible categories that businesses in the US could be classified in What are the characteristics of each cate or how do the differ Does competition differ depending on the category how How are US businessesproducers distributed among the categories Be able to completeexplain the following chart Market Type Number of Type of Entry Price producers Product Condition Comparison Pure Monopolyillegal One Unique Impossible 1 Oligopoly 24 7 Differentiated Difficult 2 MonopolisticCompetitive Many 7 Differentiated Easy 3 Pure Competition Many Standard Very easy 4 CONSUMER MOVEMENT How does competition affect the price of a product Higher price less competition For each of the 3 maior Consumer Eras What were the maior safety issues Identify the President andor Consumer Advocates andor the media that influenced the era Identify consumer legislation passed during era How did the legislation emphasis change from Era 1 to Era 3 Know what caused the end to each era ERA 11880 1917 0 Sherman Antitrust law made monopolies illegal 0 Safety problems food and drug industry 0 Strong Consumer Advocates Dr Harvey Wiley amp Upton Sinclair IThe JungleI Muckraker 0 1906 Meat Inspection Act protection during processing 0 1906 Food and Drug Act protection during production transportation and sale of foods drugs and medicine 0 1912 Better Business Bureau promote good business standards 0 1913 Federal Trade Commission Act FTC established to ensure competition in the marketplace 0 END OF ERAWW followed by prosperity in 192039s ERA 2 19291940 0 1929 Stock Market Crash 0 Consumer Advocates FJ Schlink One Million Guinea Pigs Consumers Research 1929 Colton Warne cofounder of Consumers Union1936 0 US President Roosevelt 0 Safety Issues Elixir Sulfanilamide cosmetic scandal 0 Legislation 1938 Food Drug amp Cosmetic Act safe and effective 0 END OF ERA WWII ERA 3195039s1980 0 Safety Issues cranberry scare Thalidomide scandal 0 complexity of marketplace new problems number of products availablevariety Impersonal repairing products consumers felt helpless 0 Consumer Advocates Vance Packard The Hidden Persuaders Ralph Nader Unsafe at any Speed Senators Douglas Hart etc 0 US Presidents President Kennedyconsumer rights President Johnson office of consumer affairs President Ford right to consumer education President Carter advocate for consumer protection agency 0 Legislation passed lots of laws Food Drug and Cosmetic Act amended MagnusonMoss Warranty Law Airline Bumping rules Truth in lending Fair Credit Reporting Act Equal Credit Opportunity Act 0 END OF ERA Defeat of Consumer Protection Agency US becoming more conservative election of President Reagan 0 BETWEEN ERA 2 amp 3 0 No major consumer laws passed 0 laws prior to 1960 result of scandals protection up to quotpoint of purchase 0 Between 1965 amp 1975 twice as many consumer laws passed as previous 90 years 0 Possibility of Era 4 0 Significant safety problems 0 Weak economy 0 US president as Consumer Advocate 0 No Strong Consumer Advocates andor influential media 0 Significant Consumer legislation passed Why have we not had a 4m Consumer Era What s missing 0 Strong consumer advocates and no influential media What were the first four Consumer Rights Who identifiedoutlined them Be able to identifygexplain the rights 0 President Kennedy four basic rights 0 Right to be informed 0 Right to safety 0 Right to chose 0 Right to be heard What were the additional Consumer Rights identified in addition to the first four Be able to explain 0 President Johnson 0 Right to decent environment 0 President Ford 0 Right to consumer Education 0 Consumer Representatives 0 Right of Redress 0 Have the right to protection after the purchase 0 Why are Consumer Responsibilities important Be able to discussgexplain responsibilities discussed in text and in class What problems might we encounter while trying to fulfill them To be aware of role and function in economy To perform role effectively to be alert informed and responsible consumer to exercise independence ofjudgment and action To avoid wasting resources To avoid exploitation of workers To be honest in our dealings To protest when appropriate to report wrongs occurred in consumer deaHngs To communicate with producers and businesses To accept consequences of consumer decision To report defective goods to both the seller and manufacture ADVERTISING 0 What is the purpose of advertising Any paid form of nonpersonal presentation and promotion of ideas goods or services by an identified sponsor 0 Who ultimately pays for advertising How The consumers by buying the products 0 The top 10 national advertisers primarily could be categorized as what type of business from Economic Systems Most are Oligopoly and some are MonopolisticCompetitive 0 What are the three categoriesclassifications of advertisements Be able to explain each Which type of advertisements do we see most frequently Informative 3informational advertising includes business and professional announcements such as those found in newspapers Comparative 2how a company shows its productservice is superior to that of competitors by comparing the benefits and costs DefensiveCompetitive 1 indented to stimulate immediate of a particular brand Do advertisements stimulate competition or reduce competition national vs local level 0 Reduce competitionnationally because its so hard to beat the top companies because its so expensive 0 Stimulate competition locally because there are so many places to buy certain things Discuss the relationship of advertisers and the content of the media in which they are advertising 0 They are going to sell it to who they think are going to buy it 0 Be able to name some deceptive advertising and be able to explain why they may be deceptive 0 Sins of Omission 0 Failing to express the right idea to the consumers 0 Misleading statements 0 A business telling the consumer a lie 0 What is quotbait and switch advertising Legal or illegal 0 A tactic in which a product or service is advertised at a low price but when the consumer offers to buy the merchant discourages the consumer from buying the product or service advertised and recommends a higherpriced product or serviceSWlTCHillegal 0 What is quotpufferyquot Legal or illegal 0 A claim that is obviously false but is used anywayega 0 Which federal agency has control over advertising What power do they have Are ads reviewedchecked prior to being released Do they control the price of the advertisings Federal Trade Commission To prevent business practices that are anti competitive or deceptive or unfair to consumers and to enhance informed consumer choice in public understanding of the competitive process To protect consumers maintain competition and advance performance 0 Yes 0 What is corrective advertising How successful has it been 0 Messages that a businesses order to run in consumer ads by Federal Trade Commission FTC in order to right an incorrect impression that s its previous ads have given What are celebrity endorsementstestimonials Are they effective What rules apply to celebrity endorsementstestimonials 0 For of brand or advertising campaign that involves a well known person using their fame to help promote a product or service 0 Yes 0 Endorsements must reflect honest onions findings beliefs or experience of the endorser What is the definition of a quotdeceptive ad 0 Any advertising that makes false claims or misleading statements as well as advertising that creates a false impression What is the purpose of quotmarketing research and quotmotivational research How are they similar and how are they different 0 Marketing Researchresearch that gathers and analyzes information about the moving of good or services from producer to consumer 0 Motivational Researchthe application of the knowledge and techniques of the social science especially psychology and sociology to understanding consumer attitudes and behavior What is subliminal advertising 0 Promotional advertising that the recipient is not aware of Be able to compare Consumer Reports Kiwiqer s Personal Finance Magazine and Money in relation to Purpose Maior Focusemphasis Target audience 0 Consumer Reports 0 Test product and report results 0 Produce safety and efficiency 0 Middle age 0 Kiplinger39s Personal Finance Magazine 0 Personal Finance 0 Personal Finance 0 MiddleUpper Middle income Money 0 Management of Money 0 How to invest money 0 Higher income 0 Consumer Information Catalog Who is publisher Frequency 0 Government 0 Twice a year FRA UD AND DE CE PTION 0 What is the difference between fraud and deception 0 Fraud deception deceit and trickery An intentional perversion of the truth Can prove it was intentional 0 b Deception to deceive to delude or to cheat 0 What is the difference between Caveat Emptor and Caveat Venditor 0 Caveat Emptor let the buyer beware of the market place 0 Caveat Venditor let the seller beware of the market place 0 For the following fraudszdeceptions be able to explain whatzwhy it is a problem identify which are illegal activities what are potential warning signs and rightsprotection available to consumer as the result of legislation 0 Price fixing businesses get together and determine the price of the product 0 HealthMedical 0 Surgeries unnecessary surgeries 0 4 most uncommon 0 Tonsils 0 Appendix 0 Hysterectomies 0 Caesarean 0 Medical Practices 0 Health Claims 0 Beauty 0 quotPerfectquot Female 0 Skinny clear skin straight and white teeth tall long hair clean hair hourglass shape big eyes and lips tan 0 quotPerfectquot Male 0 Channing Tatum Tall fit good skin full head of hair well groomed smile eyes 0 Role of the FDA 0 Before sold had to be proven safe and effective 0 Overseas the labeling and safety to the degree if they cause problems to take it off the market 0 Examples 0 Weight loss plans 0 Not very effective 0 FTC estimates that at least one statement in the ad is deceptive or misleading 0 Diet ads generate 59 billion in sales 2009 0 Red Flags in Diet Ads 0Testimonials 0 Before and After Photos 0 Rapid Weight loss claims 0 No diet or exercise required 0 Clinically provendoctor approved claims 0 Naturalsafe weight loss claims 0 Tanning options 0 30 million Americans that paid money to get tan 2010 0 1 in 3 females go to tanning salon 0 Most states do not let minors tan under 18 wo permission 0 Texas Law January 1 2010 0 Have to have parental permission under 18 0 Under 165 cannot use tanning bed 0 Antiaging products 0 2530 of pop has used products to make people look younger 0 Cosmetic surgeries 131 million 2010 0 77 increase 20002010 0 Most frequent procedures 0 Women 0 Boobjobnot covered by insurance 0 Botox 0Men 0 Liposuction 0 Botox 0 Automobile buying and repairing 0 Buying 0 Used 0 Odometer tampering 0 Odometer is not correct 0 1 in 4 cars 0 New 0 High Balling 0 Offer an unusually high trade in value 0 Low Balling 0 Hooked with low price and then something raises the price 0 Bushing 0 Order car 0 Packing 0 Doubledipping 0 Incentives 0 SweepstakesLotteries 0 Pyramid sales 0 The granting on condition that an investment be made of a license or right to recruit for additional investment one or more persons who also are granted such a license to recruit others 0 Phishing 0 Obtaining sensitive information about a person by posing online as someone trustworthy with a true need for the information 0 Spam 0 Sending unsolicited electronic messages in bulk 0 ID Theft Who are victims 0 What rights state and federal do consumers have concerning telemarketers 0 Tell them to stop calling 0 What is the difference between the state and federal quotno call list Would it be better for the consumer to signup for the state list the federal list or both lists Why Will this stop all telemarketing calls Why or why not 0 Texas quotNo callquot list 0 National restricts time for calls can request no additional calls disclosures required at beginning of call 0 Be able to recognize common types of nternetTelemarketingMail Frauds and how to protect yourself 0 Do not buy items promoted by spam 0 Have two email accounts one for familyfriend circle 0 Use filtersfirewalls REPORT SPAMll CONSUMER PROTECTION 0 What is the difference between a mediator and arbitrator Which may be binding on the parties 0 Arbitration the settlement of disagreement bw parties by one or more arbitrators 0 Mediation form of alternative dispute resolution whereby the parties bring their dispute to a neutral third party who assists the disputants in reaching a voluntary negotiated settlement 0 Arbitrators issue final ruling Mediators not issue any ruling but to help the parties work out a settlement that both parties agree is equitable More like a judge who hears out both parties BlNDlNG one way that s final 0 Describe how the Better Business Bureau can help consumers What is the purpose of the Better Business Bureau 0 Provide safe shopping 0 Prevent misrepresentation and fraudulence in advertising Federal Trade Commission Food and Drug Administration United States Department of Agriculture Consumer Product Safety Commission United States Postal Service MONEY MANAGEMENT 0 Be able to define and know the difference between Money income the dollars and cents you have to spend Real lncome when we exchange the dollars we have for goods and services Psychic lncome satisfaction you get from using your real income es rent utility credit card phone bill insurance car etc Discretionary lncome what s left after your quothave to s are paid Fixed Expenses expenses that never change Set in stone rent insurance car payments does not have to be a monthly expense Flexible Expenses groceries electricity varies in price Scarcity not enough of whatever is being referred to 0 TradeoffsOpportunity Costs when you use a resource it cannot be reusedresent 0 What are the steps in Money Management 0 Define your goals 0 Identify and analyze your income 0 Make financial plan 0 Put the plan into action 0 Control 0 Evaluate 0 How does one make a Financial Plan step 3 of Money Management What are some of the advantages of having a Financial Plan 0 Determine spending categories 0 Allocate money to each category government recommendations record keeping 0 Example 0 Savings 0 Utility 0 Phone Bill 0 Food 0 Gas 0 ClothesShoes 0 Entertainment 0 What is an effective way to determine how much money to allocate each month to irregular expenditures 0 Irregular expenditures on annual basis 0 What is the purpose of record keeping Why is record keeping important for good financial planningmoney management What should one do to ensure their record keeping will be effective 0 Balance expenditures with income check to see if plan has a reasonable chance of success INFLATION Define Inflation 0 Too much money chasing too few goods What are the three quottoolsquot available to government to control inflation Be able to explain how each should be used during inflation How should the tools be used in a recession 0 Wage and price controls 0 Government can regulate wages prices and profit 0 Fiscal policy 0 How much spends and gets back 0 Monetary policy 0 Federal reserve board can control money Which government agency is responsible for Monetary Policy 0 The Federal Reserve Be able to recognize stepstechniques to reduce inflation 0 Cut down the demand on reducing money supply What is the Consumer Price Index What does it measure Who is responsible for calculating and publishing the Consumer Price Index How often is it published 0 Consumer Price Index survey of product prices in the marketplace 0 Market basket of goodstypical buys of consumers 0 Government run 0 Published monthly 3 week lag time Be able to interpret the Consumer Price Index what it means to consumers in terms of costsdollars What is the base year Why is the base year important Examples 0 September 20112011 22689 0 198284 100 0 Purchasing power of dollar 42 198284 100 0 September 2011 2011 67965 1 1967 100 0 Purchasing power of dollar 15 1967 100 0 Base year is the year and amount of money worth during that time This is then compared to a new year s amount L pig llglii39l Q il i Hit r v cl i m Lilli 15w lmiixlslglui w39 if During a time period of inflation what does the government want consumers to do concerning 0 Saving money save more money or save less SAVE MORE 0 Using Credit use credit more or use credit less 0 USE LESS CREDIT During a time period of inflation what should consumers do concerning 0 Saving money save more money or save less SAVE LESS 0 Using Credit use credit more or use credit less 0 USE MORE CREDIT CREDIT 0 What is the difference between credit and debt 0 Credit cards buy now pay later 0 Definition purchasing power extended to consumers by lending agencies and it is repaid out of future wages and salaries 0 Debit cards buy now pay now 0 Definition accept purchasing power you get debt when we use credit the result is debt 0 What are some of the advantagesgdisadvantages of using credit 0 Advantages need it now emergencies easy and safe helps you build credit rating save money because you got it at the lower price today 0 Disadvantages Debt overspending what you don t have could get bad credit if you don t pay the bill by the time its due 0 Be able to name and explaindescribe the 3 C s of credit Be able to identifyrecognize examples of each of the 3 C s of credit 0 Collateral something of value idea is to keep collateral if you don t pay ie Jewelry cars homes mortgage land assets investments 0 Character Judge character on credit score number ofjobs stability how long you ve lived at residence homeowner or renter MOST MPORTANT 0 Capacity to repay reliability of income security ofjob how many people do you support on that income safe debt limit 20 income exclusive mortgage not cars or credit cardspercent of debt reaction 0 What is considered to be a safe debt load for a consumer 0 A safe debt load is one that you can pay off comfortably 0 Describe the purpose of a credit bureau and what type of information is contained in credit files Why is it important for a consumer to periodically check their credit files 0 An agency which collects and ills information about the creditworthiness of individuals A credit reporting agency does not w any decisions about whether a specific person should be extended credit or not However it does collect information that it considers relevant to a person39s credit habits and history and amp this information to assign a credit score to indicate how creditworthy a person is When a prospective creditor approaches a credit reporting agency to inquire about a particular person they are m a credit report which contains all the information relevant to the person and the credit score calculated by the agency some creditors might have an ongoing subscription to credit bureau The prospective creditor then uses that information to decide whether to extend the applicant the desired credit or not 0 Files contain history of your credit use 0 The only people who have a right to see your credit history are the people who are granting credit What does one s credit score example FICO indicate Why is it important How does having a high vs low credit score effect consumers Give examples of what one s credit score might be used for 0 Your credit score is a measure of your past ability to make payments on time and manage your credit It s designed to help lenders determine how likely you are to pay back your loan The number is calculated using a formula created by Fair Isaac Corporation which is why it s also referred to as your FlCO score According to Fair Isaac the median FlCO credit score in the US is about 720 0 620 is the dividing line between good and bad credit The average credit score is 693 720 is the most favorable credit score Scores range from 300850 0 Ways to keep your credit score high 0 Pay Bills On Time 0 Keep Balances Low on Credit Cards 0 Apply for new Credit only as needed 0 Make Sure Credit Report is Accurate 0 Do Not Close Out Old Accounts What is a quotdiscount loan and why is it good or bad How does it affect the stated rate of interest for a loan 0 A discount loan is a loan that does not require the payment of interest or any other charges rather a discount loan deducts the interest andor other charges from the face amount of the loan when it is given out What is the difference between an installment and noninstallment loan 0 lnstallments are paid back monthly where you make a payment every six months on it 0 NonInstallment loans are paid back in full at once 0 What is the difference between a secured note and unsecured note 0 Secured notes are backed by collateral providing the lender increased assurance of return of the loan amount and interest such as mortgages and deeds of trust 0 Unsecured notes are not backed by collateral You might consider an unsecured note for perhaps a friend or a nondisqualified relative but it is a higher risk and sometimes reward than a secured note 0 What is a consolidation loan Under what conditions a consolidation loan maybe okay 0 A consolidation loan takes several outstanding debts and consolidates them into a single loan In other words you take out a new loan and use that loan to pay off your other debts 0 With a consolidation loan you may be able to 0 Lower your monthly payments 0 Arrange a longer period of time to repay your debts 0 Obtain a lowerinterestrate loan 0 Get the security of a fixedrate loan 0 A consolidation loan can also be helpful if you are having a hard time managing your budget because of the constant inflow of bills With a consolidation loan you only have to keep up with one payment per month rather than juggling bills from various lenders and creditors You can even arrange to have your consolidation loan debited automatically from your bank account each month so you won t have to keep track of any paperwork 0 Why is it important to know about the quotgrace period The grace period is the cut off until they want the money The longer the grace period the better it is for you Credit cards must give you 20 days by law 0 Know 8 federal credit laws by correct name and the rights each law gives to consumers Truth in Lending must disclose APR finance charge and method all costs to consumer total cost Fair Credit Reporting Act right to see our credit report at credit bureau right to correct incorrect information on credit report must investigate and send correct information out Fair Credit Billing Act right to correct incorrect bills within reasonable time period right to withhold payment over faulty merchandise made third party holders of credit contracts accountable Equal Credit Opportunity Act illegal to discriminate in the granting of credit on the basis of sex marital status age race color religion national origin or because a person is on welfare Fair Debt Collection Practices Act makes it a federal offense for debt collectors to threaten consumers with violence use obscene language or contact consumers by telephone at inconvenient times or place Fair Credit and Charge Card Disclosure Act must disclose APR grace period method of calculating finance charge annual fee minimum finance charge with unsolicited credit card applications Fair and Accurate Credit Transaction Act free credit reports from 3 credit bureaus each year Credit Card Accountability Responsibility amp Disclosure Act Under 21 proof of income or cosigner restriction on college campuses 21 day minimum grace period restricts interest rate increases on existing balances during 1st year restricts interest rate changes on existing balances 45 day notice of interest rate changes debit cards opt in for overdraft charges 0 Be able to describe what each of the following clauses mean be able to identify the name of the clause if given a sample from a credit contract same idea as class activity on M16 Acceleration clause if you default they can accelerate the rest of the payments and make everything due Deficiency clause you are liable for the difference for what they ve received and what they are promised Balloon clause the final payment is substantially larger than previous payments Addon clause how they take multiple purchases and apply multiple payments to it Lawyer s fee Attorney s Fee clause any cost associated with a default you have to pay Holder in Due Course can go back and sue both of them Fair Credit Billing Act FOOD SHOPPING 0 What is average percent consumers spend on food Is that consistent with all income levels lower income level vs higher income level List ways to reduce impulse buying Reevaluate the cost of convenience foods time and money Determine the unit price Read the labels percentage labeling Shop the store with the lowest prices Consider store brands to replace national brands Check the date on the product opening date Examine the gimmicks offered by the store nonprice competition Use coupons if they save you money Think twice before buying higher price natural or organic andor diet foods Watch the Universal Product Code at check out What is the relationship between convenience foods time and money 0 Convenience foods are usually unhealthy and cheaper because they re convenient and take less time to cook heat up in the microwave or to eat What does unit pricing mean Be able to calculate the unit price of an item best buy given several choices 0 Identification of the retail price per unit of related products allowing for easier price comparisons between products in different places How are ingredients listed on labels Why should consumers read the labels 0 Ingredients are listed by the weight Therefore the more there is of one product will be listed first Products might not be what they say or seem to be Transportation Buying a Car Why is it recommended to buy a used car rather than a new car What is the recommendation of buying a used car vs a new car 0 You can get the same quality car for a cheaper price 0 Buy 2 year old car drive for 2 years and sell after 4 years The car maintenance will have increased by the 4th year Name some resources available to consumers to help determine the dealer s cost of an automobile andor sources of prepurchase information What would you consider to be the top 2 sources of information to help a consumer in buying a new car 0 Consumer Reports and Internet What are the 5 points to consider in buying a new car Be able to explain 0 Compare similar cars made by same company 0 True cost of ownership 0 DependabilityReliability 0 Resale value 0 Negotiating the price of the car how to bargain When are good times to shop for a new car 0 When inventories are high or sells slow 0 End of the season 0 End of the month Which is better to know Dealer s Cost or Invoice Cost Why 0 Invoice Cost it s the price the car actually costs 0 How does the down payment APR and length of financing affect the total price of a car If I wanted to save money on financing what should I do concerning these 3 factors Number of attempts have been made to repair a defects that significantly impairs it use value or safety and that continues to have this defect Delineation of a warranty rights period in which the defect must occur Serious safety defect


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