CORE STUDY

1 Consumer and
financial decisions
1.1 Overview
Numerous videos and interactivities are available just where you need them, at the point of learning, in
your digital formats, learnON and eBookPLUS at [Link].

1.1.1 Introduction
Congratulations! You are about to begin the exciting subject called ‘Commerce’. This is not a totally new
subject to you. You have been practising Commerce ever since you made your first purchase many years
ago. That simple transaction launched you on life’s journey as a consumer and as an important part of the
commercial world.
Commerce examines how people earn their income, how they spend their money, and how and what
goods and services are produced. It also investigates the ways in which governments and the law influence
people’s commercial behaviour.
Undertaking this Commerce course will give you a better understanding of how to make wise
commercial decisions.

TOPIC 1 Consumer and financial decisions 3

CONTENT FOCUS
 On completion of this topic, you will have:
• identified and researched issues that individuals encounter when making consumer and financial decisions
• investigated laws and mechanisms that protect consumers, including the process of consumer redress •
examined a range of options related to the personal financial decisions of a consumer, and assessed
responsible financial management strategies.

Resources

Video eLesson Consumer and financial decisions (eles-3506)

Digital documents Key terms glossary (doc-32664)
Worksheet 1.1 Start up! (doc-32675)
eWorkbook Customisable worksheets for this topic (ewbk-0858)

1.2 The nature of commerce

1.2.1 The scope of commerce
The world of commerce is everywhere. It is all around us, going on day and night, today and tomorrow.
The world of commerce never sleeps, but is an active and exciting place full of surprise and change.
Surviving in this competitive world of commerce is not easy. Many of the things you will do as a consumer
will require wise decision-making. Now and in the future, you will be managing your own money. You will
be earning, spending and saving your income. Through improving your knowledge of how the world of
commerce operates, you can learn to make wise consumer decisions. In our daily lives, we are constantly
making commercial choices; these commercial decisions can include things such as:
• what to buy
• what to produce
• where to live
• what career to follow
• where to invest funds
• how much money to save.
Consumers can purchase either goods or services

4 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

A consumer is someone who purchases goods and services to satisfy their needs and wants. Items we
need are those things that everyone must purchase because they are essential for our survival. This includes
items such as food, clothing and shelter. Wants are things we like to have, such as a car, phone or
 computer. A person’s wants are unlimited.
Goods are things that are produced and can be physically touched; for example, a television or a car.
Services are things that one person will do for someone in return for payment. People who provide services
include hairdressers, doctors, dentists and personal trainers.
Consumers constantly have to make choices when they purchase goods and services. Some of these
choices and decisions are quite simple, because the consequences are minor and/or available money is
limited. However, some decisions have major impacts on future life. This includes decisions such as, ‘Will
I buy this house?’, ‘Will I buy a car?’ and ‘Will I go to university?’
A consumer has the choice of purchasing either durable or non-durable goods. A durable good is one
that can be used many times, such as a car or television. Non-durable goods are those that can be used only
once, such as a sandwich or a litre of petrol.
What an individual gives up in order to satisfy a need or want is known as opportunity cost. For
example, say Jack got a part-time job helping at a local cafe. With his first pay cheque of a $100, he had to
decide whether to purchase a new video game or to put the money towards buying a car when he left
school. After much thought, he decided to put the money towards a car. His opportunity cost of doing this
was the purchase of the video game.

Jack faced the choice of buying a new video game or saving for a car

To satisfy our needs and wants, producers use resources to manufacture the goods and services that
we desire. The four types of resources are:
• Land — these resources occur naturally, such as forests, coal and fertile soil.
• Labour — this includes both the physical and mental effort of people who are working. • Capital
— these resources are goods used to make other goods. For example, a tractor is a capital good
because it is used to produce crops.
• Enterprise — this is the ability to combine the other resources of land, labour and capital so as to earn
a profit.
These resources are limited or scarce. At times, some resources can be overutilised and become even
more limited. For example, some species of fish have become quite rare due to overfishing. Overall, this
means that producers have to constantly make decisions in order to provide consumers with the goods and
services they desire to satisfy their needs and wants.

TOPIC 1 Consumer and financial decisions 5

1.2 Activity: Research and communication
1. Design a pamphlet aimed at 15-year-old students explaining the importance of making wise consumer
decisions.
 2. In small groups, discuss how the internet may influence consumer decision-making. Summarise the views of
the group as dot points in a visual presentation.

1.2 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
1. Use the words in the list to complete the following passage.
unlimited wants food goods plumbers services computer consumer scarce A ____________ is someone
who purchases ____________ and services to satisfy their needs and ___________. Needs are those items
that everyone must purchase because they are essential for survival. This includes items such as
__________, clothing and shelter. Wants are things that we like to have, such as a car, mobile phone or
____________.
Goods are things that are produced and can be physically touched; for example, a television or a car,
while ____________ are things that one person will do for someone in return for payment. People who
provide services include ___________, doctors and dentists.
Wants are _________ while resources are __________.
2. Classify the following goods as needs or wants by including them in the correct column in the table:
television, house, bread, car, shirt, computer, coat, mobile phone.

Needs Wants

3. Classify the following as either goods or services by including them in the correct column in the table:
plumber, television, bicycle, doctor, dentist, camera, dress, electrician, teacher, shoe.

Goods Services

4. Explain the difference between durable and non-durable goods.

5. Outline what is meant by the term ‘opportunity cost’.
6. Sally decides to spend her pocket money on a cake instead of saving it to buy a mobile phone. What is the
opportunity cost of her decision?
7. Explain the difference between each of the four resources that are used to manufacture our goods and
services.
Fully worked solutions and sample responses are available in your digital formats.

1.3 Key factors affecting consumer and

financial decisions
All consumers have individual needs and wants. Therefore, what people buy varies from one person to
another. For example, if you asked each class member what she or he wants, the responses would reveal a
wide variety of goods and services. Let us look at the key factors affecting consumer decisions.

1.3.1 Customer service

Good pre-sales and after-sales service makes you feel you are a valued customer. Consequently you
will keep buying products from that store. Poor service can have the opposite effect.

6 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

1.3.2 Price you want to know. If the price of a good is more than
you can afford, you will probably not buy it.
How much is it? This is usually one of the first things Consumers want the best value for their money: that
is, they want to pay the lowest price for the best Tomato Sauce 4 × 220g
pack
quality. To ensure this, the Competition and
Consumer Act 2010 (Cwlth) implemented a per unit Total price
pricing code for many products. This makes it very $4.20

easy for consumers to compare the price of products

Per unit price
even if they are in different sized containers.
$0.48/100 g

1.3.3 Convenience
Many consumers do not have a lot of time to shop.
They want shopping to be hassle-free, or convenient.
Convenience has many meanings for consumers, such Convenience can be a major factor affecting consumer
as travelling time to a retail outlet, the number of decisions.
stores located within one shopping complex or
suitable shopping hours. These factors will influence
when, where and what consumers buy. Nowadays,
convenience also relates to being able to shop online
or to have access to an app.

1.3.4 Marketing and advertising

SPC Baked Beans in

This plays an extremely important role in influencing our consumer decisions. As

consumers, we are constantly exposed to all aspects of marketing. The average
consumer is exposed to an estimated 500 marketing strategies (mainly some form
of advertising) every day. New products are released onto the
market and advertised. If the marketing campaign is successful, consumers will be
influenced into thinking they need this product.

1.3.5 Gender
Males and females have a number of common wants, such as entertainment, music and a car. However,
a person’s gender influences some types of purchase. For example, female consumers may spend more
on cosmetics than males. The influence of gender on consumer decisions is best displayed by the
products advertised in catalogues for Mother’s Day and Father’s Day: mum gets the iron and dad gets
the cordless drill!

1.3.6 Age
As a baby, you most probably wanted a toy or rattle. Now you are a teenager, you may want a mobile
phone. By the time you are 18, a car becomes an important want. Later on, you might wish to buy a
place to live in and when you are older and have retired, you may want to go on a world trip. Our wants
change over time.

1.3.7 Disposable income

A consumer’s level of income determines what kind of products they regularly purchase. Disposable
income refers to the amount of money that households have available for spending and saving after
income taxes have been accounted for. A buyer with higher disposable income will spend more on luxury
or lifestyle items. People with higher disposable income also spend more on vacations and tours.
 TOPIC 1 Consumer and financial decisions 7

1.3.8 Environmental considerations

With increasing community awareness of environmental pollution, many consumers are becoming more
aware of the problems caused by throwaway packaging. You therefore may be influenced to purchase a
product that has minimal packaging or packaging that can be recycled.

1.3.9 Social media

Social media includes websites and applications that enable users to create and share content or to
participate in social networking. It incudes programs such as Facebook and Instagram. Social influencers
are people with a large audience who post regularly on social media promoting products. The content they
post often influences their followers’ purchasing decisions.

1.3.10 Cultural factors

Cultural factors are the set of basic values, perceptions, wants and behaviours of a particular community or
group of individuals. The culture of an individual influences the way they behave. What an individual learns
from their parents and relatives as a child becomes their culture. Cultural factors have a significant effect on
an individual’s buying decisions. Every individual has different sets of habits, beliefs and principles that
they develop from their family status and background.

Resources

Digital documents Worksheet 1.2 Using spider maps (doc-32676)

Worksheet 1.3 Supermarket shopping: the hidden persuaders (doc-32677)
Worksheet 1.4 The art of persuasion (doc-32678)

1.3 Activity: Research and communication

1. In small groups, discuss why some consumers are prepared to pay a high price for a product while other
consumers would not buy the product even if the price was low. What does this tell you about the
relationship between price and customer tastes and preferences?
(a) In pairs, debate the following topic: ‘Advertising is the most important factor affecting consumer
decisions’. One person presents the affirmative case and the other person the negative case. Each
person writes the key points for their case.
(b) Divide the class into two groups, those for the affirmative case and those for the negative case. Each
group is to refine their arguments before a spokesperson presents the group’s comments.

1.3 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
1. Survey the members of your family for instances of when they have been influenced by each of the factors
affecting consumer decisions when making a purchase. Use a table similar to the following example to
present your information.

Factor Consumer decision

higher income, he purchased a new car.
Disposable income
My brother got a new, higher paying job. With the
8 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5
2. Using a mind mapping program such as bubbl or mindmap, add elements to the mind map below to
summarise the factors affecting consumer decisions.

People on higher incomes

buy more luxury goods

Age
Disposable
income

Customer
Key factors affecting
service
consumer decisions Gender

Marketing and
Environment advertising
Price

Culture Social media

Convenience

3. Explain how consumers would benefit from per unit pricing.

Fully worked solutions and sample responses are available in your digital formats.

1.4 How individuals make particular

decisions 1.4.1 Whether to spend or save?
The most basic financial decision consumers need to make is how much of their income to save and how
much to spend. Income is money received on a regular basis from work, property, business, investment or
welfare. To gain the greatest possible satisfaction from their income, many people develop a financial plan.
Consumers need plans so that they will have enough money to take care of their needs and satisfy their
wants. A plan might cover income and spending for the week, month, year and even future years. By
making these plans, consumers should be able to improve their wellbeing or quality of life. These plans are
called budgets.
a budget! to make wise
financial decisions,
because it controls
I never have enough money. your desire to buy
That’s because A budget on impulse.
you don’t have assists you How would a budget help?
 Consumers who do not have a budget are often heard saying that ‘money burns a hole in my pocket’:
a sure sign of poor financial decision-making.

TOPIC 1 Consumer and financial decisions 9

1.4.2 What to buy?

Most goods and services are available from more than one retailer or e-tailer. Often the same product
costs different amounts at different stores or sites. Shopping around to obtain the best deal is referred to
as comparison shopping. When making a major purchase, it is essential you compare the price, quality,
availability and after-sales service. If you know the cheapest price in the marketplace, you are in a better
bargaining position. If the prices are almost identical in all stores or sites, the most conveniently located
store or the site you are familiar with is probably a wise choice. If there is a lot of difference between the
prices, the cheapest product may not always be the best buy because it may be of inferior quality, and
consequently not last as long as more expensive items. The more you know about the items you intend to
buy, the better shopper you will be.

COMFACT
Many Australian families spend up to 40 per cent of their disposable income at the supermarket each
week. Therefore, comparing grocery prices can save a family quite a lot of money over time.

There are many different ways to compare products and prices.

 Online shopping — e-commerce — has made comparison shopping much easier. You can quickly
compare prices for a wide variety of products from online stores around the world. However, whether it is
an online ‘click’ store or a real ‘brick’ store, you should always avoid the temptation of impulse buying.

I bought it
on impulse.

North
Pole
100 km

Esky

10 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

There are many different types of goods and services
Generic products are those that lack a brand
and we buy them for a range of reasons; for name. These products are usually cheaper and
example, consumables, household goods, luxury of an acceptable quality.
items, repair services or information services.
Some types of shops are cheaper than others. For
example, department stores (Myer), discount
variety stores (Target and Big W) and large
specialty stores (Harvey Norman and JB Hi-Fi
outlets) are usually cheaper than small, independent
retailers because larger stores can carry more stock.
However, most small retailers focus on high levels
of assistance and after-sales service.
Some brands are cheaper than others. Well-known,
highly reputable brands tend to be more expensive than those brands that are not well known. However, this
does not always mean that a cheaper product is of inferior quality although, generally, expensive products
are better quality and will last longer. When you buy a product, you need to think about its quality as well
as the price.
 Do not be pressured into buying something quickly. Making a quick decision will usually result in you
wasting your money. Purchases made on the spur of the moment can often turn out to be unsatisfactory.
You may be left with a product which does not meet your requirements and which you may never use.
To help you make wise decisions in the future, follow the eight rules for comparison shopping, shown
in the following figure.

Eight rules for comparison shopping

1. Think carefully about what you want.

2. Shop around for the best deal.
3. Investigate the product’s features.
4. Decide beforehand how you want to pay.
6. Do not sign anything you do not understand or a blank
form.
5. Check the refund and returns policy.
7. Compare after-sales service and guarantees.
8. Keep all receipts and invoices.

Resources
Digital documents Worksheet 1.5 Teenage spending habits (doc-32679)
Worksheet 1.6 Shop to a budget (doc-32680)
Weblink Comparison

TOPIC 1 Consumer and financial decisions 11

1.4 Activity: Research and communication
1. Advise others of the advantages of comparison shopping by either:
(a) creating a collage poster
(b) designing a pamphlet
(c) preparing a PowerPoint presentation.
2. In small groups, visit different electronic retailers or use the [Link] weblink in the Resources
tab to research and determine the best deal for a:
(a) 14 megapixel digital camera with 10 × optical zoom
(b) 42” (106 cm) LED television with 1920 × 1080 pixel resolution
(c) 34 litre 1000 watt microwave oven.
Select a product from the list and explain why it was the best deal. Share your results with the rest of
the class.

1.4 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
1. How is impulse buying different from comparison shopping?
2. (a) What is a generic product?
 (b) List the sources you could use if you wished to undertake a comparison shopping exercise.
3. Briefly outline the main advantages of comparison shopping.
4. Here are a number of strategies you can use to help avoid impulse buying. Copy each of them into your
notebook and then explain how the strategy would help you to avoid falling into the trap of impulse buying.
(a) Prepare a shopping list.
(b) Compare different brands.
(c) Compare prices at different stores.
(d) Ask yourself, ‘Do I really need this?’

Fully worked solutions and sample responses are available in your digital formats.

1.5 Choosing where to buy

1.5.1 Range of locations and sources
Once you have decided what you want to buy, the next decision is where to buy the product. Once
manufacturers have produced products, they are then usually distributed to wholesalers. The wholesaler
buys large quantities, then sells smaller quantities to retailers. Wholesalers add their costs and a profit to
the price they charge the retailer. The retailer then sells the products directly to the consumer. Retailers, too,
add their costs and a profit to arrive at the recommended retail price.

CASE STUDY
What price should I really pay? Manufacture price? Wholesale price? Retail price?
Discount price?
Basically, there are four types of prices at which products sell in passing from the manufacturer to the
consumer. These are:
1. The manufacture price, which is the price at which wholesalers purchase products.
2. The wholesale price, which is the price at which retailers purchase products.
3. The recommended retail price, which is the normal selling price at which stores sell the product. This is the
price at which the manufacturer and/or wholesaler suggests the retailer (the person selling directly to the
public) sells the product. (This can sometimes be 50 to 100 per cent more than the price paid to the
wholesaler.)
4. The discount price, which is any price below the recommended retail price.

12 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

The following diagram shows the usual distribution chain through which products pass from the place of
manufacture to the point where they are sold. At each stage in this distribution chain, the seller needs to make a
profit. This is done by selling the products at a higher price than the price at which they were bought. This
means that the final price consumers pay depends on the price the seller paid and the profit he or she makes, or
at which stage in the chain consumers buy the goods. Sometimes, for example, the consumer can buy products
at a cheaper price directly from the manufacturer or wholesaler.

The distribution chain. In a country as large as Australia it is necessary to provide a reliable and
efficient distribution network. The vital link between each of the organisations is transport.

Sometimes

ELECTRIC CITY

Manufacturer Warehouse
 Wholesaler
ACE HI-FI

Sometimes
Retailers Consumers

The range of locations and sources that consumers can access to purchase products

Non-store retail Retail stores Locations

Mail order Convenience stores Local

Department stores

Discount department stores

Supermarkets/hypermarkets

Specialty stores

Stall/marketplaces

Door-to-door Regional

Party plan Interstate

Auction Global

Telemarketing

Internet shopping

Vending machines

Developments in transportation and technology, especially communications technology, have provided

consumers with a wide range of locations and sources from which to purchase products (see the table
above).
The type of product to be purchased will usually be the main factor influencing both location and source
decisions. For example, we normally purchase everyday products such as foodstuffs at a local supermarket.
We might buy some specialised clothing over the internet from a retailer located in another country or from
a mail order catalogue.
Each type of location and source has advantages and disadvantages for consumers. Usually, where to
shop will be a matter of individual choice. One consumer might be prepared to travel some distance to
shop at a specialty store where the range may be more selective, while another consumer might prefer to
shop at the local mall. The local shopping centre might be the only option for some groups who are unable
to travel far or who do not have internet access; for example, the elderly.

TOPIC 1 Consumer and financial decisions 13

1.5.2 Mail order retail stores

Mail order is a system of shopping in which the • the convenience for consumers with a disability or
consumer completes and posts an order form, usually those who live in remote communities.
from a magazine or catalogue, and receives products However there are a number of disadvantages with
through the mail. this type of purchasing including the risk of:
The advantages of mail order shopping include: • a • losing money if a business does not send the
greater range of products is available than found in product • products being different in reality from the
way they appear in the catalogue
• experiencing problems tracing a business that uses
only a post office box number if a refund is required.
The electronic version of a mail order catalogue is
online shopping or television channels dedicated to
showing product demonstration commercials.

1.5.3 Online shopping

Magnamail catalogue purchases can be made by mail, fax,

phone or online.

The internet has revolutionised the way people shop as it provides consumers with a whole new shopping
experience: online shopping. With a personal computer connected to the internet, the shopping
experience is available to consumers anywhere, and people can buy almost anything from anywhere in the
world.
Shoppers who are ‘time poor’ like the convenience of since Australian consumer protection law is not
shopping online. It is quick and easy if you know normally enforceable for overseas purchases. It is
what you are looking for, or have to decide between essential you read the
only a few products. Other consumers like being able
Many consumers shop online to save time and money.
to shop around for the cheapest price or to select from
a wide range of goods and services at a time that suits
them. However, online shopping can become
time-consuming and boring if you are making a
purchase that requires lots of comparisons over many
sites. The risk of impulse buying is also great when
you shop online because you can get bombarded with
targeted advertising aimed at tempting you to splurge
on something you really don’t need.
Regardless of the reason for using your mouse rather
than leaving your house, you should be aware of
some of the risks involved with online shopping. The
basic rules of wise shopping still apply, especially
policies regarding refunds, returns and your privacy before you provide your credit card details. This is
especially true for online auction sites. Before you become involved in an online auction, make sure you
understand how it works, what your rights are and what you can do if things go wrong.

COMFACT
Tips for online shopping:
• Check the details regarding product return, refund and exchange.
• Ensure that the site is secure and that your credit or debit card details are encrypted.
• Convert the displayed price to Australian dollars.
• Receive confirmation of your order and follow its progress.

14 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

If you use only trusted online shopping sites and are not tempted by any deals that seem too good to be
true, shopping online can be just as safe as in a store. It is recommended that you use a separate credit card
with a low limit to make online payments instead of debit cards. That way you can protect your bank
account should your card number be compromised. Alternatively, you can use an online payment facility
such as PayPal. If customers experience problems such as non-delivery of goods they can contact the
facility to obtain a refund.
The main advantages of online shopping are:
• an increase in the range of sources from which you can buy
• comparison shopping can be done from the comfort of your home and at a convenient time • the product
may be cheaper
• it allows for quick price comparisons
• relatively quick delivery times even from overseas sites
• allows the use of mobile devices and apps which make online shopping easier.
However, there are a number of disadvantages of online shopping, including:
• a website may not be permanent and tracing the owner if anything goes wrong may be impossible • a
delivery charge may be added to the price
• the return of a faulty product will take time and effort
• supplying credit card details can be risky unless the site is secure; that is, personal information is coded
• the proliferation of scams and internet fraud.
As well as using personal computers, consumers are increasingly using smartphones to compare product
features, search for the cheapest price, or find store locations. Woolworths, for example, offer a
smartphone app to make price comparisons easier, create and save a shopping master list, locate stores and
scan the barcodes of products. Online shopping will become increasingly popular as more businesses
provide shopping applications (apps) for use with smartphones.

Smartphone shopping apps can be used to undertake product research and make purchases.
 TOPIC 1
Consumer and financial decisions 15
CASE STUDY
Emma learns an expensive lesson
Emma was a Year 9 high school student who was a very
good swimmer. She decided to use her birthday money
to purchase a new swimming costume. She visited the
local stores but couldn’t find an option she liked, so went
online and found a costume on a Malaysian-based
website that was exactly what she wanted. The costume
cost $200 but the small print on the site stated that a 1.5.4 Types of retail outlets
discount of 50 per cent would be given if the purchaser
made a direct money transfer. Emma thought this was a
great bargain and immediately ordered and paid for the
swimmers. Online shopping can be risky
That evening she explained to the family what she had
done. Her brother told her directly transferring money,
especially to an overseas firm, was not a good idea. He
said he would not be surprised if she had been
scammed. Nevertheless, Emma was still confident about
her purchase.
Three weeks after making her purchase, her swimmers
had still not arrived. Emma went online but the website
she had been using was no longer available. She then
rang her bank to see if she could get her money back,
only to be told that because the payment was a direct
international transfer, this was not possible. She was also
told that in future she should make online purchases
using a credit card or, even better, use a third-party
payments facility such as PayPal. Emma thought it was
terrible that she had lost $100, but the worst part was
putting up with her brother saying ‘I told you so!’
While retailing has become much more complex and sophisticated in the twenty-first century, the basic idea
has not changed. Buyers and sellers still come together in a marketplace and products are exchanged for
money.
The following covers six main types of retail outlets.

Conven ience ‘corner’ stores

These stores were once located in residential areas but
are now commonly attached to service stations. They
sell a variety of products, concentrating on food
items, magazines and newspapers. Prices at these
stores are usually higher than at supermarkets and
there is generally less choice available. However, they
are convenient.
7-Eleven — a convenience store
16 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5
S pecialty stores
Hairdressers, newsagents and gift shops are examples
The Body Shop — a specialty store
of specialty stores. They specialise in either one type
of product or service or a limited range of a few
products. Some specialty stores are part of a larger
franchise chain such as Dymocks and The Body
Shop. The main advantage of purchasing goods from
a specialty store is the service and product knowledge
provided by the sales staff.

Discount variety stores

These stores are of a plain design and offer basic

Target — a discount variety store customer service.
Their products are normally
cheaper than those of department stores. Kmart
and
Target are both examples of this type of retailing.
Discount variety stores attract a large number of
customers because of their convenient location,
large range of stock and cheaper prices.

Fac tory outlets

These shops are often near the factory where the A factory outlet
goods were manufactured. The goods are
normally
sold to the public at a discount because the costs
of
transportation and wholesalers are not involved in
the distribution chain. Factory outlets usually
offer
big savings on goods.

Department stores
Myer and David Jones are two well-known A department store
examples of retail department stores. These stores
 sell a large range of products within the one store.
Because they buy in bulk, their prices are often
cheaper than at specialty stores. However, because
they offer some sales assistance on the shop floor,
their prices tend to be higher than those of a
discount variety store.

TOPIC 1 Consumer and financial decisions 17

Superm arkets
These are large, self-serve stores such as Woolworths,
Supermarkets sell a wide range of goods.
Aldi and Coles. Originally selling only food items,
they are now becoming more like discount variety
stores, offering a large range of items for sale. Some
supermarkets that have expanded to sell an even
larger range of products have evolved into
hypermarkets.

COMFACT

An average hypermarket has up to 100 checkouts and 90 to 100 aisles. They stock over 60 000 items compared
to a supermarket, which stocks approximately 14 000.

1.5.5 Buying locally, regionally, interstate and globally Once a

consumer decides what to buy, he or she then needs to decide where they will shop.

Locally
The local convenience store or shopping arcade, containing a takeaway, newsagent and possibly a fruit and
vegetable store, will frequently be used by consumers who live nearby. People travelling to and from school
or work often shop here because of the convenient location. However, their purchases are restricted to only
a few basic items. For a larger variety of goods, they will need to shop at a regional centre.

Regio nally
A large regional shopping centre Departmentstores, discount department stores and
supermarkets are often located in large regional
shopping complexes, such as Westfield shopping
centres, and are surrounded by numerous specialty
stores. The stores are located under the one roof,
air-conditioned for consumer comfort and, most
importantly, provide plenty of parking. Often,
cinemas and food halls are part of the shopping
complex. Customers from the surrounding region
travel to these complexes.
Interstate or globally
Nowadays, mainly due to the ease of online
shopping, consumers can purchase goods from
another state or country. We live in a global world, rather than a world limited by national borders.
Consumers are no longer restricted to their local or regional shopping centres. Consequently, consumers
in search of a specific item, cheaper prices or greater variety will often decide to purchase from a global
marketplace.

Resources
Digital document Worksheet 1.7 Product website search (doc-32681)
Weblink NSW Fair Trading Youth

18 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

1.5 Activity: Research and communication
1. In small groups, discuss: ‘Home shopping via the television or internet makes it more difficult to be a wise
consumer’. Choose a spokesperson to share the group’s comments with the class. 2. Compare the prices of
a wholesaler and a retailer for a range of similar brand household electrical appliances. What generalisations
can you make about price variations based on your evidence? 3. Conduct a survey of class members to
determine how often they visit each of the different types of retail store within a one-week period. Rank the
different purchasing options from most to least frequently visited. 4. In small groups, survey ten people to
determine the factors that influence them to shop at a particular type of retail outlet (store and non-store).
Your survey form could be similar to the following. The first response has been included for you.

Where purchased
Goods outlet
(type of retail outlet) Reason for selecting this
1. Groceries Supermarket Convenience, cheap prices, wide variety
2. Magazines

3. Household electrical
appliances 4. Sporting

equipment

5. Clothing
6. Fruit and vegetables

7. Books

What generalisation can you make about people’s shopping habits based on these results?

1.5 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to your
learnON title at [Link].
1. What is the difference between a manufacturer, wholesaler and retailer?
2. Explain why it is sometimes cheaper to buy from a manufacturer or wholesaler than a retailer. 3. What is the
difference between the recommended retail price and the discount price? 4. A manufacturer sells a product to a
wholesaler for $50.00. The wholesaler adds on 50 per cent when selling
it to the retailer. The retailer adds on another 65 per cent when reselling it. Calculate the price the consumer will pay
for the product.
5. List the advantages and disadvantages of mail order shopping.
6. Collect three mail order catalogues. Paste the order forms into your notebook and then answer the following
questions about each catalogue:
(a) Is the order form easy to understand or confusing?
(b) What do the letters ‘p & p’ mean?
(c) What methods of payment are accepted?
(d) Would you purchase the goods being advertised? Why or why not?
7. Why are more expensive products such as washing machines and televisions often easier to buy at less than the
recommended retail price than less expensive products such as magazines and sweets? 8. Why would a retailer be
prepared to sell at less than the recommended retail price?
9. List two reasons people may prefer to shop online.
10. Tamzin decided to purchase a smartphone she saw advertised on an interstate electronic company’s website.
The price was $995 (including postage and packaging). She completed the credit card payment details and
submitted her order.
(a) What extra charges are included in the cost of the smartphone?
(b) What should Tamzin have done locally before purchasing off the internet?
(c) Explain how Tamzin is at a disadvantage if the smartphone is faulty.
(d) Why should Tamzin keep a record of (i) the order and (ii) the retailer’s address details? TOPIC 1 Consumer and

financial decisions 19

11. What is the basic idea of retailing?

12. How are specialty stores able to exist in competition with large discount variety stores? 13. List one advantage
and one disadvantage of buying goods from each of the six different types of retail outlet.
14. Examine the table entitled ‘The range of locations and sources that consumers can access to purchase
products’. Name a real-life example of each type of retail store and non-store retailer.
15. Over the past ten years or more, two interesting trends have emerged in retailing. One is the increase in the
number of grocery supermarkets with delicatessens, bakeries and coffee shops. Another is that, during the same
period, the number of small, family-owned grocery stores has decreased.
(a) What do you think has caused this trend in retailing?
(b) What strategy would you suggest to help a small, family-owned grocery store prosper? 16. Select what you
consider to be the most important advantage and disadvantage of online shopping. Justify your selections.
17. Read the case study ‘Emma learns an expensive lesson’ and answer the following questions. (a) What incentive
was Emma given to encourage her to pay with a direct money transfer? (b) Explain how Emma could have avoided
the problem she encountered.
18. Use the NSW Fair Trading Youth weblink in the Resources tab to read about how to protect yourself when
shopping online. Prepare a summary of this information by creating a wordcloud consisting of what you consider to
be the twenty most important words.
19. Use the Woolworths weblink in the Resources tab to learn about the app’s features. What benefits does this
website offer a Woolworths customer?
Fully worked solutions and sample responses are available in your digital formats.

1.6 Different payment options

1.6.1 Different methods of payment
Michelle really likes the colour and style of the jacket on display. It is on special at $125. She tries it on. A
perfect fit! The decision to buy it is an easy one to make. After wrapping the jacket, the assistant asks,
‘How would you like to pay for it?’ This is an even more important decision.
A consumer can select from a variety of different methods of payment.

Cash
This is the notes and coins (money) issued by the federal government. Consumers normally use cash to
pay for relatively inexpensive items such as a newspaper, bus fare or soft drink. Consumers rarely use cash
for expensive items such as a car or a house.
The main advantages of cash include:
• it is accepted almost everywhere
• some stores offer a discount for cash
• there are no hidden costs (for example, interest charges)
• there is reduced risk of getting into debt.
The main disadvantages of cash include:
• it can be easily lost or stolen
• it may not be safe to carry around
• if no ATM is available, a consumer may not be able to make a desired purchase if they don’t have
enough cash on them.

COMFACT
Notes and coins are legal tender and must be accepted as payment for goods and services. 20 Jacaranda New

Concepts in Commerce Fourth Edition NSW Stages 4 & 5

Credit
Credit is the supply of money now in return for the promise of paying it back later. Credit allows you to
buy what you want immediately and pay for it later, either in full or in monthly payments. Because you are
using money you do not have, you will be charged interest for its use unless you pay the total balance back
to the credit card company before the end of the interest-free period, usually one month. The main
advantages of paying by credit card are that they:
• avoid the necessity to carry around large amounts of cash
• are a convenient payment method for online and telephone purchases
• help you establish a good credit history
• offer cheap use of funds, provided you always pay your balance in full.
However, there are disadvantages. Credit cards can:
• make it easy to overspend and consequently build up your debt
• be more expensive than other forms of credit such as a personal loan
• damage your credit rating if you continually make late payments.
Care should be taken with your credit card. If the card is stolen, you must ring the bank immediately
and cancel the card in case someone else tries to use it to purchase goods unlawfully.
Credit cards can be linked to systems such as
Google Pay so you can pay using your
Some credit cards, including MasterCard smartphone.
branded cards, can also be debit cards.
 Name of Card time the card Credit
account number is able to be facility
holder Period of used available

Credit cards can be linked to your smartphone. This means by using systems such as Google Pay,
Samsung Pay or Apple Pay, you can purchase your goods simply by waving your smartphone at the
terminal.
Learning to use credit wisely is very important. Getting into debt can lead to many problems. You may end
up losing your goods, being sued or even made bankrupt. Managing credit and debt is a necessary skill in
today’s complex commercial society. Whenever you use credit there is one important thing to remember:
buy now, pay MORE later, unless you manage the credit carefully by repaying the total balance owing
before the end of the interest-free period.

Store credit
Some large stores or retail groups issue their own cards that operate like regular credit cards. These cards
usually are associated with special deals, discounts, bonuses and a rewards program. However, these cards
usually have higher interest rates and fewer interest-free days than regular credit cards.

PayPal
Most online merchants accept PayPal as one of their methods of payments. PayPal is an intermediary
whereby you end up paying for the good using your credit card, bank account or money stored in your
PayPal account. PayPal’s advantage lies with its security and ability to obtain a refund if a dispute about
the transaction arises.

TOPIC 1 Consumer and financial decisions 21

How PayPal works

Electronic funds transfer: debit cards and BPAY®

There is a great deal of difference between a debit and a credit card. With a credit card, you use other
people’s money and are charged interest. With a debit card, you are using your own money, by
electronically accessing money already in your account. You pay no interest, only an account operating fee,
and can spend up to your account balance. The most common way of using your debit card for purchases
of goods is by EFTPOS (electronic funds transfer at point of sale).
EFTPOS is a computerised system in which money is Direct debit
transferred from a consumer’s account to the
business’s account. It is important that EFTPOS
receipts are kept for checking against account
statements. Often businesses will also allow you to A customer using an EFTPOS machine to make a payment
withdraw extra cash with EFTPOS.
BPAY® is another type of electronic payment method.
This system uses the telephone or internet to transfer
funds from your cheque, savings or credit card
account to the account of the business you wish to
pay. First a consumer keys in a login and password to
access their internet or phone banking account. Then
they enter the transaction details, including a special
customer reference number written on the bill, so
money is transferred from their bank account directly
to the business’s account.

Resources

Digital document Worksheet 1.8 Give me credit! (doc-32682)

Many consumers have bills that arrive at regular intervals such as telephone, rates and car insurance. By
using a direct debit system, you can schedule bill payments from your nominated bank account. The bank
automatically withdraws (debits) the funds from your account and electronically transfers the funds to the
business requiring payment. It is a convenient method of payment that helps overcome the problem of
forgetting to pay an account. These payments can normally be set up and terminated by using internet
banking.
While direct debit is becoming increasingly popular, there are some disadvantages. For example, you must
make sure you have enough money in your account to pay the bill or the payment will be refused. You may
also be charged by your bank if you don’t have enough funds in your account to pay. You, therefore,

22 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

have to be careful to remember when the money will be taken out and ensure your account always has
enough funds to cover the payments. Relying on direct debit also means that some consumers do not
actually check whether their bills are accurate.

Cheque
A cheque is a written communication ordering your financial institution, called the drawee, to pay a
person a specific amount of money. The person being paid is called the payee. The person authorising
the transaction is termed the drawer. Cheques are issued in a numbered order, called a chequebook.
When writing a cheque, no blank spaces should be left before or after the amount. This prevents words or
numbers being added later.

A not negotiable cheque cannot be cashed by anyone other than the payee named on the cheque.
 payment Not negotiable — written can be cashed or deposited only
Payee — person or organisation between two by
being paid parallel lines. This ensures the the payee.
cheque Amount in words
Cheque butt — record of Drawee — financial institution

15/1/19 HOMETOWN BANK Ace Ace Insurance

15/1/19 the sum of To:
Date Insurance Fifty dollars 50.00 E

Pay
Amount in figures
Date

or bearer
$
for: B

Premium 50.00
Karen Smith
T
A

L I

This cheque Balance

ON
TO
GE Drawer
Forward $$$ N

KAREN SMITH
264398
Drawer — the person writing and signing
BSB and account number Signature Do not
the cheque leave blank spaces.

Cheque number

Some advantages of using cheques include:

• they are safer than carrying cash
• they can be posted safely
• only the named recipient is able to cash the cheque, again making them safer.
Disadvantages of cheques include:
• they are not accepted everywhere
• cheques take time to process and clear (more than a day)
• bank charges are involved with having a cheque book.
Lay-by
When you buy goods using lay-by, you first pay a deposit and then the store puts aside the good for you.
You then make regular payments over a fixed period of time. Unlike cash or credit card purchases, you do
not take possession of, or own the good, until you pay off the last instalment owing.
If you cancel the lay-by before paying the full purchase price, the store must be notified in writing. The
store is required, under the Lay-By Sales Act, to provide a refund after deducting storage, handling and
depreciation costs. If you do not complete payment by the agreed date, the store can cancel the lay-by.
After receiving written notification from the store, you have seven days to decide to either pay the full
amount or receive a refund, less costs.
Lay-by is a good option when you want to secure something you desire. Because no interest is charged,
it is cheaper than other options such as using a credit card. However, lay-by is quickly being replaced as a
method of payment as consumers opt for ‘buy now, pay later’ providers such as Afterpay and Zip Pay.

TOPIC 1 Consumer and financial decisions 23

Book-up
Book-up is credit provided by a retailer so that you can purchase goods from the retailer’s store and pay the
account at a later date. You must pay back this amount within a set period of time.
Tradespeople such as plumbers and builders usually they experience difficulty in accessing alternative
have an account with a hardware supplier where they methods of payment.
can book up materials and equipment. People living The main advantages of book-up are:
in remote locations may also use book-up because • you can purchase goods and pay for them later •
interest is not charged unless you apply for an
Tradespeople usually have an account with a hardware
extension of time supplier
• you can spread your purchases over a week or
fortnight.
However, there are some disadvantages, including: •
some form of security may be required
• unless you keep accurate records, you may
overspend • charge accounts can be used only in that
store.

CASE STUDY
Book-up — Jill’s corner shop

Jill had been booking-up items with a corner shop. When she went to check how much her account was she
questioned why her bill was so high. The trader told her he had been letting her relatives book-up on her account.
Jill told the trader that she was not responsible for the items that she had not authorised. The trader said she
was. Jill told the trader that she gave approval only for her daughter and aunty to book-up on the account. Jill
was able to show the trader her copy of the letter stating who could use the account. The trader still wanted the
full amount owing from Jill.
Jill contacted Fair Trading to get information on how to solve the problem. A Customer Service Officer was able
to help her resolve the matter with the trader. This was possible because Jill had kept all her receipts and the
agreement she had with the trader.
Source: NSW Fair Trading, Book-up.

Afterpay
Afterpay is a digital service linked to a customer’s within seven days.
credit or debit card and enables consumers to ‘buy ‘Buy now pay later’ providers such as Afterpay are
now, pay later’. The service is available to consumers replacing lay-by as a method of payment.
over 18 years, and allows consumers to purchase
something at the current price and pay this amount off
in four equal instalments every two weeks.
The advantages of Afterpay include the following: •
instant online approval and no application fees • no
annual fees, and no extra payments if you pay on time
• the purchaser receives the good or service
immediately.
The main disadvantage of Afterpay is that significant
fees are charged if you miss a payment. Afterpay
charges a standard $10 late fee per missed payment,
and a further $7 if the payments are not received

24 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

For example, say Stephanie saw a pair of jeans she really liked. Because she wanted to wear them that
night, she purchased them using Afterpay. She intended to pay the purchase amount off over the next eight
weeks in four instalments of $25 each. However, she was late on two of her payments and was charged a
late fee of $10 on each occasion. Her $100 jeans ended up costing her $120.
Due to the rapid success of Afterpay, a number of competitors have entered the market, including Zip
Pay and Sezzle.

1.6.2 Ranking payment options

Anthony was recently granted a credit card Anthony chose a very inappropriate way to pay for his car.
by his bank with a limit of $5000. He was
very pleased with this and went out and
purchased a second-hand car that he could
drive to work instead of catching the bus.
However, at the end of the month his credit
card statement said that he needed to pay
over $100 in interest plus make a further
minimum payment of $50. Anthony was
outraged. He arranged a meeting at the bank
where a personal loan was organised to pay
off the credit card. His monthly repayments
were now only $40 per month, which he felt
was much more manageable. On the way
home from the bank, he cut up his credit
card.
Deciding on which payment option is most appropriate for you is very important. Anthony chose an
option that was not at all suitable for him. Your decision should be based on aspects such as your
income, personal preference, privacy, fees charged, interest rate, convenience and security.

You need to consider these things when deciding how you will pay for goods and

services. Income

Security

Consider
these when
you decide
how to pay
Convenience

TOPIC 1 Consumer and financial decisions 25

Interest rates Fees

Personal
preference

Privacy
1.6 Activity: Research and communication
1. Set up a class debate to consider the following topic: ‘Careless consumers, and not credit, are to blame for debt
problems’. Share roles so that those not debating are involved either in assisting with research, or in running the
debate and keeping notes on the arguments of both sides.
2. In small groups, research the options that could be taken to improve financial services for people living in remote
communities. Present the group’s research to the rest of the class.
3. Reflect on some of your own recent purchases. What influenced your decisions on what to buy and how you paid
for it? Discuss your thoughts with another student.

1.6 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to your
learnON title at [Link].
1. What is meant by the term ‘legal tender’?
2. Why should credit be used wisely?
3. What are the advantages and disadvantages of using a credit card?
4. What is the difference between a debit card and a credit card?
5. What do the letters EFTPOS represent?
6. Draw a diagram showing what happens when a BPAY®transaction occurs.
7. What is the advantage of setting up a direct debit to pay a regular bill such as electricity or rent? 8. What is a
cheque?
9. When writing a cheque, why should no blank spaces be left before or after the amount? 10. Study the cheque in
section 1.6.1 and then answer the following questions.
(a) Who is the drawer of the cheque? Who is the drawee?
(b) What is the name of the payee?
(c) What is the number of the cheque?
(d) Suggest reasons why the amount for the cheque is written in both words and figures. (e) What effect do the words
‘Not negotiable’ have on a cheque?
11. If you buy an item through lay-by, when do you have possession and ownership of the good? 12. What must you
and the store do if you cancel the lay-by before paying the full purchase price? 13. What are the advantages and
disadvantages of using:
(a) lay-by
(b) book-up?
14. What method of payment would you prefer for the following purchases? Why?
(a) A microwave oven from a department store
(b) Groceries at a store in a remote community
(c) The annual car registration
15. What advice would you give a friend who wanted to take up an offer for a store credit card? 16. Describe how
PayPal works.
17. What method of payment should Michelle (referred to at the beginning of this subtopic) use to purchase the
jacket? Justify your choice, and take into account the following factors: She has:
• $364 in her savings account
• a credit card with a limit of $500
• $130 in her wallet
• a part-time job and earns $135 per week.
18. Errors can be made when filling in cheques. Which of these errors would cause the cheque to be worthless to the
payee?
(a) The cheque date was left blank.
(b) The cheque butt was filled out incorrectly.
(c) The drawer forgot to sign the cheque.
19. Why are retailers prepared to offer lay-by services without any charge?
20. What would stores want to know about you before allowing you to book-up a good or service? How would they
find this out?
21. Explain why Anthony made a poor choice when deciding to pay for his car with a credit card. 22. State some of
the things you should consider when deciding on how to pay for a good or service.
Fully worked solutions and sample responses are available in your digital formats. 26 Jacaranda New Concepts in
Commerce Fourth Edition NSW Stages 4 & 5

1.7 SkillBuilder: Comparison shopping

investigation 1.7.1 Tell Me
Jamie has moved into a flat and wants to purchase a new microwave oven. Since he is working full-time as
well as studying, he does not have much time to compare the prices, quality and reputation of the various
brands on the market. He, therefore, decides to use a comparison website, such as Canstar Blue, to assist
him in his decision-making.

Resources
Weblink Canstar Blue

1.7.2 Show me
Jamie has many expenses associated with moving into his flat, so his most important criteria when selecting
the brand of microwave to purchase is value for money. However, since he is a very untidy person, he feels
that ease of cleaning is also an important consideration.
Jamie draws up the following table and, using the information on the Canstar Blue website, fills it in as
shown.
use
Brand of Overall
microwave Value for money Ease of cleaning Ease of satisfaction
Brand A ⋆⋆⋆⋆⋆ ⋆⋆⋆⋆⋆ ⋆⋆⋆⋆ ⋆⋆⋆⋆
⋆⋆ ⋆⋆⋆⋆⋆ ⋆⋆⋆⋆⋆

⋆⋆⋆⋆ ⋆⋆⋆ ⋆⋆⋆⋆⋆

Brand B ⋆⋆⋆⋆⋆ Brand C ⋆⋆⋆⋆ Brand D ⋆⋆⋆⋆⋆ ⋆⋆⋆ ⋆⋆⋆⋆ ⋆⋆⋆⋆

After considering the options, Jamie decides on the Brand A microwave because it has the highest rating
in his two main criteria, even though Brand B had a higher overall satisfaction rating. Jamie’s next step is
to visit the websites of the main retailers, both e-tailers and also those who have a store in his
neighbourhood.
After a little more research, he is able to pick up a great deal on his new microwave. TOPIC 1 Consumer and

financial decisions 27

1.7.3 Let me do it
Complete the following activities to practise this skill.

1.7 Activities
Jamie is very happy with his microwave but now decides he needs a television for his flat. He has a budget of no
more than $700 and wants to purchase as large a TV as possible. His overall criteria are value for money and ease of
use.
1. Complete the following table using the comparison website Canstar Blue; add in rows as you need them.

Brand of television Value for money Ease of use Overall satisfaction Brand A

Brand B

2. Based on Jamie’s criteria, which brand should he purchase? Give reasons for your answer. 3. Now you have
decided which TV Jamie should purchase, visit the websites of the main retailers and find the cheapest price for the
selected TV.

1.8 Consumer protection

1.8.1 The need for consumer protection
Most consumers know what it means to be given ‘a
fair go’. It means being treated justly and honestly.
For example, when you buy a product it should be
of good quality, a sales assistant should not give
you misleading information and once you have
signed a contract all parties must abide by the terms
and conditions.
The majority of businesses are trustworthy,
honest and act ethically: that is, they conduct their
operations in a fair and morally right manner.
Occasionally, however, consumers are not given
a fair go in the marketplace.
It is for this reason, state and federal governments have passed laws that are designed to protect consumers
in the marketplace. Two crucial pieces of protective legislation are the Competition and Consumer Act
2010 (Cwlth) and the Fair Trading Act 1987 (NSW).
Under the Competition and Consumer Act, an unconscionable act by a seller is any practice that is just
not reasonable, such as scams and rip-offs. Such an act is illegal and some traders do it to gain an unfair
advantage over the unsuspecting consumer. Every year, 1 in 20 Australians fall victim to some type of
scam. These people lose millions of dollars and sometimes their identities. The aim of any scam is to trick
you into giving away money or your personal details. Get-rich-quick schemes, fake lotteries and miracle
health cures are some of the favoured methods used by scammers to rip off people. Scammers are creative
and manipulative and try new versions of scams. As a wise consumer, you need to be aware of these
unethical techniques so you can protect yourself from such practices. Remember the golden rule to help
you beat scammers: ‘If a deal sounds too good to be true, it probably is.’
Some of the more common scams and rip-offs include those shown in the following figure. 28 Jacaranda New

Concepts in Commerce Fourth Edition NSW Stages 4 & 5

Beware of these common

scams and rip-offs

Common
scams and rip-offs

Pyramid
schemes

Special prizes and offers

schemes
Get-rich-quick

Referral
selling

False and misleading

advertising

Unordered or unsolicited goods

False and
misleading advertising
 nature of the product.

Referral selling
Bait and switch advertising is misleading and deceptive.

Two of the most common false and misleading

advertising techniques are: • bait and switch
advertising. This involves advertising a few
products at reduced and,
therefore, enticing prices to
attract customers. When the
advertised products quickly run out, customers are
directed to higher priced items.
• misleading advertising. Some advertisements use
words that are deceptive or claim that a product has
some specific quality when it does not. Such actions
convey a false impression of the exact
This illegal technique offers the consumer a ‘special deal’ if she or he buys the product and then supplies
the names of potential customers to the trader. The ‘special deal’ usually takes the form of a discount or
commission, which is not always paid.

TOPIC 1 Consumer and financial decisions 29

Unordered or unsolicited goods
This practice involves sending unordered goods through the mail and then demanding payment for them.
The Competition and Consumer Act 2010 protects you from having to pay for these goods. You should
write to the trader, explaining where the unordered goods can be picked up. The goods become your
property after one month of mailing the letter. If you do not write, then the goods become your property
after three months. You must not use the goods during this period.

Special prizes and offers

You scratch the prize coupon to discover you have won a ‘mystery’ prize. When you go to collect your
prize, you are told you can receive it only if you purchase a certain number of goods. As a consumer you
should be careful of any deal that involves free gifts, prizes, lucky numbers or ‘free deals just for you’.

Get-rich-quick schemes
In this type of scam, a letter or email arrives
offering you the chance to participate in the transfer
of money from another country. For your help,
you will receive a percentage of that amount.
However, you are required to supply your bank
account details for the transaction to occur, giving
the scammer the opportunity to steal your money.

Pyramid schemes
The chain letter is the most common form of this
type of scam. You are required to pay a joining
fee with the opportunity of earning quick and easy
money as you recruit new members. However, most
participants will lose their money.

CASE STUDY
How Jamie lost his savings
Jamie was a 70-year-old pensioner. One day
he received an email saying he was the winner
of a European lottery, and had won more than
$2.5 million. The email had originated in a country
where Jamie had a number of relatives; it had
an official-sounding name, and used long serial
numbers that made it sound important.
Jamie replied to the email giving his phone
number and some other details. A man rang him
saying that to process the prize money he needed
to pay a $300 fee. Jamie did not want to miss his
prize so quickly sent the money.
He was soon regularly receiving calls or emails
asking for money to pay for various fees or taxes.
Over a 12-month period, Jamie sent more than
$30 000 overseas before eventually working out
he was being scammed.

Resources
Weblinks NSW Fair Trading
Scamwatch

30 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

1.8 Activity: Research and communication
1. In small groups, brainstorm as many ethical issues as you can that relate to misleading and deceptive
advertising. Share your responses with the rest of the class.
2. Create a poem or rap song that explains the meaning behind the golden rule of avoiding scams.
3. Use the NSW Fair Trading weblink in the Resources tab to:
(a) investigate the most recent scam alerts. Select a scam that interests you and present a brief oral report
to the class as to how this scam operated.
(b) Summarise the ten golden rules that reduce the chance of being scammed.
4. Use the Scamwatch weblink in the Resources tab to visit the federal government’s ‘Scamwatch’ website
and learn more about the latest scams targeting Australians.

1.8 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
1. Name two important pieces of legislation that protect consumers.
2. Unscramble the following words and then use each one in a sentence to explain its meaning.
(a) rfai og
(b) anunooclecbisn cdnoctu
(c) lfrrreea lisegnl
(d) tbai nda htwsci
(e) dlienasmgi vtseagndrii
3. Write a brief report about a scam or rip-off in which either you or a member of your family has been involved.
4. Draw a series of comic strips to illustrate what happens when a bait and switch scam occurs. 5. What does
 the law say to do if you are sent some goods which you did not order?
6. With reference to the case study of how Jamie lost his savings, why do you think Jamie was vulnerable to
this type of scheme? What advice would you give Jamie to ensure he does not fall for similar scams?
Fully worked solutions and sample responses are available in your digital formats.

1.9 Reasons for and features of a simple

contract 1.9.1 What is a contract?
Suppose you buy some groceries at the supermarket. You hand the seller the money and she or he gives
you the groceries. In this situation, you and the seller reach an agreement. The seller agrees to supply you
with a good at a certain price and you agree to pay that price. Another word used to describe an agreement
is a contract.
A contract is a legally enforceable agreement between two or more persons or parties. The contract
outlines the details of the agreement and the rights and responsibilities (obligations) of each of the parties.
A contract is most often an oral (verbal) agreement. Agreements that involve large sums of money, such as
when buying a house, are usually put in writing.

Every consumer transaction involves a contract. TOPIC

1 Consumer and financial decisions 31

1.9.2 Features of a simple an offer to purchase. The offer can be either

accepted or rejected by the retailer. This applies to
contract Three essential elements make a self-service situations particularly. In the
contract legally binding: the offer, the acceptance supermarket example, you make the offer to
and the purchase the groceries.
consideration.
Acceptance
Of fer An acceptance occurs when the offeree agrees to
An offer is a proposal. It involves one of the parties the proposal. This involves either a written or oral
offering something of value (for example, money) statement or an act that clearly communicates
to the other party in the agreement. The person acceptance of the offer, such as a shake of the hand.
making In the supermarket example, the seller accepts your
the offer (offeror) must clearly communicate their offer to purchase when she or he hands you the
intention to the other party (offeree). groceries.
Many consumers think that when a business
displays items in the store or advertises something Conside ration
in a catalogue, the business is making an offer to Consideration is the final essential feature required
sell. It is not. What appears to be an offer is in fact to form a valid contract. This stage requires each
an invitation to treat and the business does not party to the agreement to give up something of
legally have to sell the good. The consumer makes value. Consideration can take the form of a sum of
money paid, or the promise to do something. In the You’ve got
supermarket example, you give up your money and a deal!

the retailer gives up the groceries.

LEGAL CASE — OFFER ACCEPTANCE

The three elements of a legally binding contract Excellent.

Here’s a
cheque.
I’ll give
you $7000
for your car.

CONSIDERATION

OFFER

Sure.

Pharmaceutical Society of Great Britain v. Boots Cash Chemist Ltd (1953)

This English legal case was the first to decide that the customer offers to purchase the goods when she or he
takes them to the checkout. The customer’s offer could be refused here, so a contract of sale exists the
moment the checkout operator accepts the offer.

32 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

LEGAL CASE — OFFER AND ACCEPTANCE
Carlill v. Carbolic Sm oke Ball Co. (1893)
In this famous example of a contracts case, the manufacturers of a flu cure promised to pay 100 pounds ($200)
to anyone who caught the flu after using the company’s Carbolic Smoke Ball. This offer appeared in a
newspaper advertisement. Mrs Carlill bought the remedy from a chemist and used it as directed. However, she
subsequently caught the flu.
The company argued there was no contract between Mrs Carlill and themselves as no offer was made because
it was only an advertisement. The company also claimed that an offer cannot be made to the world at large. Mrs
Carlill won because the court decided the act of using the smoke ball was an acceptance of the company’s offer.
It also established the fact that an offer can be made to the general public.

The advertisement that Mrs Carlill responded to when she

purchased a Carbolic Smoke Ball
 LEGAL CASE — CONSIDERATION
Chappell & Co. v. Nes tlé Co. Ltd (1960)
Sometimes the nature of consideration is not so straightforward. In this case, Nestlé offered a music record to
customers who sent them a small amount of money plus three chocolate wrappers. However, Chappell & Co,
who owned the copyright of the music, would receive only minimal royalties because the music was being sold
at a reduced price.
The court ruled that the wrappers did form part of the consideration for the sale of the records, despite the fact
they had no real value.

TOPIC 1 Consumer and financial decisions 33

1.9 Activity: Research and communication
1. With a partner, research online to discover the meaning of the term ‘invitation to treat’.
2. In a small group, research online and prepare a short talk on a famous contract law case.

1.9 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
1. What is meant by the term ‘contract’?
2. Identify the three elements of a valid contract.
3. Explain the significance of each of the legal cases outlined above.
4. Describe two contracts you have made recently and then answer the following questions about each one.
(a) Was the contract oral or written?
(b) Who were the parties in the contract?
 (c) What consideration was given by the parties?
5. Examine the following hypothetical cases. State whether or not you think a contract exists. Discuss the legal
reasoning behind your decision. Share your answers with the rest of the class.
(a) Gemma offers to buy Zara’s laptop computer for $850. It is agreed they will make the exchange when
Zara delivers the laptop to Gemma’s house. Once there, Gemma says she is no longer interested. (b)
Hamaub agreed to sell his car to Colleen for $10 000. The agreement was written and signed by both
parties, at which time Colleen paid Hamaub a deposit of $1000. Two days later, Colleen changed
her mind and wanted her deposit back.
(c) An art dealer mistakenly attached a price tag of $100 to a painting that was worth $1000. A customer
offered to buy the painting for $100.
6. ‘Oral contracts are not worth the paper they are written on.’ What is meant by this expression? Share your
answer with the rest of the class.
Fully worked solutions and sample responses are available in your digital formats.

1.10 Legal rights and responsibilities of

consumers 1.10.1 Legal rights of consumers
Consumers have four basic rights. These are:
1. Safe products. Directions for proper use are provided and products are tested by the manufacturer to
ensure product quality.
2. Accurate product information and descriptions. For example, ingredients are clearly labelled on food
containers.
3. Full disclosure of the terms of sale. The full price is always displayed, especially on any credit contracts.
4. Consumer guarantees and warranties are honoured. Customers can expect a refund or exchange if the
product is faulty.

1.10.2 Protective legislation

In 2011, a single, national consumer law — the Australian Consumer Law (ACL) — was introduced, which
operates using the Competition and Consumer Act 2010 (Cwlth). This federal Act applies in the same way
to all Australian consumers and businesses, regardless of where the business operates or where the
consumer shops.
The Act’s main purpose is to protect consumers against undesirable business practices, such as:
• misleading and deceptive advertising
• unconscionable (unreasonable and unethical) conduct
• misrepresenting the contents of products, their place of manufacture or their characteristics • unfair
trade practices that restrict competition and which can severely limit the rights of consumers • false
claims regarding goods and services.

34 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

The Competition and Consumer Act 2010 is • Fine print. Important conditions are written in a
administered and enforced by the Australian small-sized print and are, therefore, difficult to read.
Competition and Consumer Commission (ACCC),
The ACCC Shopper app includes consumer information
each State and Territory’s consumer agency, and the and tools to set reminders and keep copies of receipts.
Australian Securities and Investments Commission
(ASIC).
As we have seen in subtopic 1.8, of all the unfair
trading practices, false or misleading advertising can
be the most serious because of the influential nature
of advertising. Even though consumer protection
legislation makes false or misleading advertising
illegal, there are still a number of methods used by
some retailers. The most common are:
 • Before and after advertisements. Consumers may be misled by, ‘before’ and ‘after’ advertisements
where the comparison is distorted so that before images are worsened and after images enhanced. • Tests
and surveys. Some advertisements make unsubstantiated claims; for example, stating ‘9 out of 10 people’
prefer a product when no survey has been conducted.
• Country of origin. Accuracy in labelling is important; for example, ‘Made in Australia’ and ‘Product
of Australia’ have two distinct meanings.
• Packaging. The size and shape of the package may give a misleading impression of the contents.

Consumers are now protected, under the Competition and Consumer Act, against
misleading advertising or false claims on the part of the business.

Something
wrong with that
… hmmmm

ACCC
Rep

COMFACT
The ACCC has been successful in prosecuting several large firms for false or misleading
advertising. These include:
• Reckitt Benckiser, the manufacturers of Nurofen, who were fined $6 million for misleading consumers
regarding their pain-specific range of products.
• Acquire Learning and Careers Pty Ltd, who were fined $4.5 million for unconscionable conduct and making
false and misleading statements when encouraging people to enrol in inappropriate educational courses.

TOPIC 1 Consumer and financial decisions 35

1.10.3 Consumer guarantees

The Competition and Consumer Act 2010 provides consumer guarantees on certain goods and
services. These guarantees are a consumer’s automatic legal right. Consumers are guaranteed that the
goods they buy:
 • are of acceptable quality
• are fit for purpose (suitable for that which they are being sold)
• match the description, sample or demonstration model
• comply with any express warranty. A warranty is a voluntary promise made by a manufacturer or
supplier about the goods.
• are legally owned by the seller without any charges (money owing on them)
• have spare parts reasonably available.
Consumers are guaranteed that the services they buy are:
• fit for purpose
• provided with reasonable skill and care
• provided within a reasonable time.
If something goes wrong, the consumer should seek a remedy from the business, usually in the form of
a refund, replacement or repair.
Consumer guarantees have important implications for businesses. For example, signs that state ‘no
refunds given’ are unlawful, because they imply it is not possible to get a refund under any circumstance,
even when there is a problem with the good or service.

1.10.4 Responsibilities of consumers

Consumers have numerous responsibilities as well as many rights. These responsibilities include paying
the correct amount, purchasing goods and services from ethical and legal sources, using the products in an
environmentally friendly manner and accepting most of the risk when they purchase something. The legal
term for this acceptance of risk is ‘caveat emptor’, which is Latin for ‘let the buyer beware’. A seller is not
required to tell you everything about the goods for sale. Therefore, it is the purchaser who is accepting the
most risk.

Caveat emptor means ‘let the buyer beware’.

 $1000

USED CARS
 Caveat emptor

36 Jacaranda New Concepts in Commerce Fourth Edition

NSW Stages 4 & 5

It’s okay! The

sales person said their name was at the bottom of the sign.

Resources
Digital document Worksheet 1.9 The unfinished script (doc-32683)

1.10 Activity: Research and communication

1. Create and perform a roleplay for a situation in which the principle of ‘caveat emptor’ applies.

1.10 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
1. Identify the basic rights of consumers.
2. What is the name of the legislation that provides some protection to consumers? Outline five undesirable
business practices that it prohibits.
3. What is meant by the term ‘consumer guarantees’?
4. List the features a (i) good and (ii) service must possess to be considered acceptable quality.
5. Under what circumstances is a business required to offer a refund?
6. In each of the following examples, state whether there has been a breach of the Competition and
Consumer Act.
(a) A company advertises a particular brand of television and states that it is at a cheaper price than a
competitor. This statement is false.
(b) A company advertises jumpers and claims that they are made in Australia when in fact they are made in
China.
(c) A company advertises that a special deal is for only one week when in fact it plans to extend it for two
months.
7. Describe the responsibilities of consumers.
Fully worked solutions and sample responses are available in your digital formats.
 1.11 Organisations that provide assistance
for consumers
1.11.1 State government
New South Wales Fair Trading is the state consumer protection agency. It provides information and
assistance to all consumers on areas such as consumer issues, shopping on the internet, home building
and motor vehicle sales. The department has the responsibility for:
• assisting consumers to resolve their complaints
• checking that products meet Australian safety standards
• ensuring that scales, scanners and petrol pumps used to weigh and price products are correct
• warning the community about dubious business practices such as scams and rip-offs.
1.11.2 Ombudsman
The word ‘ombudsman’ is based on a Swedish word meaning ‘agent’; someone who has the task of
investigating and reporting on complaints. In the last few years, industry ombudsmen have been established
to deal with disputes between consumers and specific businesses including finance, telecommunications and
insurance.

TOPIC 1 Consumer and financial decisions 37

COMFACT
The Telecommunications Industry Ombudsman (TIO) provides consumer advice and a dispute resolution
service for problems with telephone and internet service providers.

1.11.3 Federal government

The two federal government commissions largely responsible for assisting consumers are: 1. Australian
Securities and Investments Commission (ASIC). This commission protects consumers in the areas of
consumer credit, investment, life and general insurance, superannuation, and banking (except lending) in
Australia. The aim of ASIC is to assist in reducing fraud (scams and rip-offs) in financial markets and
financial products.
2. The Australian Competition and Consumer Commission (ACCC). This commission operates nationally
for the enforcement and administration of the Competition and Consumer Act, and acts as a watchdog
on the pricing of goods and services. The ACCC is obligated to inform the public so that they are
aware of their rights and responsibilities under the law.

CASE STUDY
Ayesha learns to read the fine print
Ayesha recently updated her phone to the latest model and wanted to
add a new unique ringtone to it. She found the ringtone she wanted
on the internet and downloaded it but did not read the conditions in
the small print. Very soon, Ayesha found that $10 per month for new
ringtones was being added automatically to her phone bill.
Ayesha tried repeatedly to terminate the ringtone service but could
find no options to delete or even contact the firm. Eventually she called
her phone company; however, they said they were unable to assist her
 and that she needed to contact the ringtone firm.
Exasperated, Ayesha contacted the Telecommunications Industry
Ombudsman, who very quickly helped her to favourably resolve
the issue.

1.11.4 Independent organisation: CHOICE

CHOICE is Australia’s largest consumer
watchdog organisation. It is independent, non
profit and not tied to any political party. When
CHOICE was formed in 1959, there were no
government consumer affairs departments and
no laws governing fair trading.
Apart from its lobbying for the introduction
and improvement of consumer legislation,
CHOICE has conducted comparative tests
on thousands of goods and services. The organisation also deals with consumer inquiries and investigates
consumer complaints. The results of these tests, readers’ letters and informative articles are published in its
monthly magazine CHOICE and on its website.
CHOICE aims to provide consumers with information and guidance about goods and services. By
providing this information, it helps consumers protect themselves and encourages them to lobby for their
rights to adequate information, and to adequate resolution where products are unsatisfactory. By helping to
educate the public, as well as making consumers aware of their rights, CHOICE is assisting consumers to
get better value for money.

38 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

1.11.5 The media

Current affairs television programs sometimes investigate
consumer complaints about poor quality products, shoddy
or
costly repairs, poor service, or scams and rip-offs. The bad
publicity often causes the business to resolve the problem.
Some newspapers have regular columns providing
consumer
advice and letters from consumers outlining individual
complaints. Radio stations, especially talkback programs,
will provide an expert to discuss consumer issues or advise
callers on a particular problem.

Resources
Digital document Worksheet 1.10 The telecommunications ombudsman (doc-32684)
Weblinks CHOICE
ACCC
NSW Fair Trading

1.11 Activity: Research and communication

 1. With a partner, use the ACCC weblink in the Resources tab and find two products that have been recalled.
Give a short talk to the class on why these products were recalled.
2. Ask your teacher or librarian to source multiple copies of CHOICE magazine or use the CHOICE weblink in
the Resources tab to visit their website. Choose a product review that interests you and read the article.
Why is information like this useful for consumers?
3. Use the ACCC and NSW Fair Trading weblinks in the Resources tab to find consumer information and
advice provided by the Australian and NSW governments. Prepare a 30-second elevator pitch on the piece
of advice that you found most interesting.

1.11 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
1. List the government and independent organisations that provide assistance for consumers.
2. Outline how each of the following assists consumers.
• New South Wales Fair Trading
• Australian Securities and Investments Commission
• Australian Competition and Consumer Commission.
3. Briefly outline the role of CHOICE.
4. In small groups, determine which of the organisations mentioned in this subtopic would be best suited to
deal with the following situations.
(a) Gina has a complaint regarding her telephone account.
(b) Tim wants to read a comparative test on digital cameras.
(c) Zachary believes the local butcher’s scales weigh in the butcher’s favour.
(d) Eva wants some advice about the Competition and Consumer Act.
(e) Caro thinks that his insurance policy contains misleading information.
5. With reference to the case study ‘Ayesha learns to read the fine print’, describe how Ayesha could have
avoided her problem with the ringtones.
6. ‘The best protection a consumer has is to be well-informed about his or her rights and responsibilities.’
Discuss.
Fully worked solutions and sample responses are available in your digital formats.

TOPIC 1 Consumer and financial decisions 39

1.12 SkillBuilder: Questioning and

research 1.12.1 Tell me
The following steps provide a useful guide to carrying
out research:
• Identify and understand the general task you are
attempting to complete.
• Develop a series of specific questions that will
help guide your research in the appropriate
direction,
and help you determine the information you need.
• Locate appropriate sources of that information.
• Record relevant information from a range
of sources.
• Present the information in an appropriate form.

1.12.2 Show me
Imagine you have been asked to investigate the role of your state Consumer Protection or Fair Trading
authority’s website in providing advice for consumers and businesses.
Your first step is to clearly identify the key task. This could be expressed as follows: ‘Prepare a report
on the type of advice the state Consumer Protection or Fair Trading authority website provides for
consumers and businesses, with examples.’
It is now necessary to break this down into a series of more specific questions. These could include:
1. How is the website organised to provide advice?
2. What types of headings or categories of information are used?
3. How is the material broken down (types of industries, types of products, and so on)? 4. If a
consumer has a specific problem with a particular product or supplier, what does the website advise
them to do?
5. What sort of advice is provided to businesses?
6. What are some relevant examples?
The next step is to locate your sources. Each state authority has a website, so you simply need to use a
search engine to find the name and website of your home state’s Consumer Protection or Fair Trading
authority.
Keep your questions beside you as you navigate through the site, and note the location of material that
provides answers. You can select and print some text, and then highlight those sentences or paragraphs that
provide answers to your questions. Sometimes a complete answer to a question may be found in several
places in a piece of text. Be sure to highlight all relevant text, and indicate with a number which question
the information answers.
When you are satisfied you have found the answers to all the questions, you need to write the answers
in order, making sure you use your own words as much as possible. You can then use the answers to
present your information in the required form. For example, this may be an oral report to the rest of the
class, an essay to be marked by your teacher, a PowerPoint presentation, or any other format that is
appropriate.

1.12.3 Let me do it
Complete the following activities to practise this skill.

1.12 Activity
Using the outlined process as a model, carry out the following research task:
Prepare a report on the type of advice the ACCC gives to consumers in relation to internet and phone usage.
In your report, include specific examples of each.

40 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

1.13 Processes of consumer

redress 1.13.1 Remedies and their outcomes
As you walk into a store, you see two large signs carefully?
which say, ‘Sorry, no refunds’ and ‘Choose Consumers have some basic rights. The signs
carefully, no exchanges’. Does this mean you referred to at right are quite misleading. Under
could not get a refund or exchange if the good was certain circumstances, a seller cannot refuse a
faulty at the time of purchase, or it did not do the refund or
job you were told it would do, or it was incorrectly
Such signs are meaningless and unlawful.
labelled?
You take an electrical appliance to be repaired and
the service person tells you that they will take all
care but no responsibility. Does this mean that, if
they accidentally drop your appliance and break it,
there is nothing you can do about it? Have you
ever bought a brand new item and it doesn’t work,
even though you followed the instructions
 exchange. If the goods are different from how they are labelled, if they were faulty when manufactured or
do not do what you were told they would do, then you can seek a refund or exchange. A repairer may also
be liable for any damage that is caused if the service is not carried out with care and skill. Consumers can
redress the things that are wrong.
Once you have established that the problem has not been caused by a mistake on your part, contact
the trader either by phone or in person. You may be required to put your complaint in writing. Explain
the problem in a calm, logical, but assertive manner. ‘Losing your cool’ tends to make a situation worse.
There are some important points to remember when making a complaint.
• If using the phone, always get the name of the person you are talking to.
• Keep a written record of all conversations and copies of letters and emails.
• File any receipts, dockets or credit accounts to show proof of purchase.
• Return the faulty good promptly.
• If you leave the good with the trader, request a receipt.
• Check your guarantee to determine whether it covers the problem being experienced.

1.13.2 NSW Fair Trading

If you have tried to redress the problem and are still not satisfied, then your next course of action is to
contact your local NSW Fair Trading office and seek advice. This will be an informal conversation where
you explain the circumstances of your problem. If you wish to take it further, you must lodge a formal
written complaint and ask the office to negotiate or mediate on your behalf. The office personnel will ask
you to provide certain information and copies of any relevant documents.
The office will make contact with the trader and attempt to reach an amicable solution. The office will
then contact you and inform you of the outcome.

1.13.3 NSW Civil and Administrative Tribunal

If you are still not satisfied the problem has been redressed, you can lodge a claim with the NSW Civil and
Administrative Tribunal (NCAT). This tribunal was formed in 2014 and deals with a broad and diverse
range of matters, including consumer claims, tenancy issues, building works, equal opportunity and
administrative review of government decisions. It can generally hear claims up to the value of $40 000.

TOPIC 1 Consumer and financial decisions 41

This tribunal has the power to make the following orders to resolve a dispute:
• order that money owed does not have to be paid
• order for goods or services to be provided
• order faulty goods be fixed or replaced
• order a refund and goods to be returned.
The NSW Civil and Administrative Tribunal can arbitrate on a dispute between two parties and the decision
of the tribunal is legally binding.

3 4

1 1 Interpreters can be arranged

9
free of charge.

7
 2 The meeting will be held within four to five weeks of the complaint being lodged.

3 The meeting is conducted in an informal atmosphere.

4 It is a closed hearing, that is not open to the public.

5 The referee will hear the claims put forward by both the consumer and the trader.

6 The referee tries to reach a settlement both parties are happy with.

7 Consumer

8 Both parties conduct their own case without legal representation.

9 Trader

Resources
Digital document Worksheet 1.11 The Takata Airbag (doc-32685)
Weblink NCAT

1.13 Activity: Research and communication

1. A consumer bought a pair of jeans. The label recommended ‘machine wash and tumble dry’. The consumer
followed the instructions but the jeans shrank.
In small groups, role-play the scene where the consumer returns the jeans for a refund. Conduct the
role-play three times with the consumer adopting:

42 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

(a) a passive manner
(b) an aggressive manner
(c) an assertive manner.
After the roleplay, list the strategies people used to be assertive.
2. Use the NCAT weblink in the Resources tab to locate the NSW Civil and Administrative Tribunal website and
answer the following questions:
(a) What types of matters does the NCAT handle?
(b) How much does it cost to make an application to the NCAT?
(c) Will the tribunal try to settle the dispute before making a decision?

1.13 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
 1. Explain what you must do to make a formal complaint to NSW Fair Trading.
2. ‘Sorry. No exchange/refunds.’ Explain under what circumstances a sign like this is invalid. 3. You purchased
a new shirt, but when you got home you realised you did not like the colour. Are you entitled to a refund? Why
or why not?
4. Explain why losing your temper when asking for a refund or exchange will only make the situation worse. 5.
Imagine you buy a laptop computer and find it is damaged. The store owner believes you dropped it and
should pay for repairs. Construct a flow diagram showing the steps you can take to make a consumer
complaint. Briefly outline what occurs at each step. Alternatively, prepare this as a PowerPoint presentation.
Fully worked solutions and sample responses are available in your digital formats.

1.14 Financial management

1.14.1 The importance of financial management
Acquiring, saving and growing the necessary funds to live a full and satisfying life, now and into the future,
requires planning and management. Consider the following fable of the cicada and the ant.

CASE STUDY
The fable of the cicada and the ant
One summer day, a cicada emerged from the ground to the ant and humbly begged for food. ‘If you had
and began singing with all his heart. He saw an ant listened to my advice in the summer you would not
passing by, bearing a heavy load of seed to store for be in need now,’ said the ant. ‘I’m afraid you’ll have
the winter. ‘Come sing with me,’ said the cicada. to go without.’ Only then did the cicada realise: it is
‘I must stockpile food for the winter,’ said the ant, best to prepare for days of necessity.
‘and I advise you to do the same.’ The ant stockpiled plenty of food to use during the
‘Don’t worry about winter, it’s still far away,’ said the long, cold winter.
cicada. The ant wouldn’t listen and continued her
work. When winter arrived, the starving cicada went

Individuals managing their income and savings are faced with similar decisions as faced by the cicada
in the fable. Is the task to enjoy life now with no consideration for the future, stockpile funds in
preparation for future necessities, invest savings to capitalise on potential growth, or a combination of
these? Your

TOPIC 1 Consumer and financial decisions 43

approach to financial management is a personal one. However, if you make poor choices, the consequences
can be like those of the cicada in the fable; you may not be able to satisfy all your needs and wants.

1.14.2 Consequences of poor financial management

Excessive debt
Poor management of finances can result in a number of unwelcomed personal, social and legal
consequences, as follows:
• Personal: These can include being unable to satisfy one’s own needs (for example, food and shelter) or
wants (entertainment costs or ongoing costs of a smart phone); inability to maintain lifestyle choices
(such as living arrangements, hobbies and leisure activities); feelings of self-doubt or regret; stress at
home, school or work; physical, mental and emotional illness; repossession of personal property (for
example, car or home); accumulation of excessive debt (money owing); or even bankruptcy. •
Social: Consequences in this area include relationship tensions or breakdown (for example, between
friends, family or co-workers); social isolation through an inability to afford the cost of social activities
(such as going out to dinner, getting together for coffee, going to movies, bands or events, or gym
membership); inability to holiday, travel or invest with others.
• Legal: Consequences of excessive debt in this area may include:
• garnishee of your wages or bank accounts, which is a court order that allows an employer or bank
representative to take money from your wages or accounts and then give it to your creditors (the
people that you owe money to).
• writ of execution, a court order that allows a court official (the sheriff) to seize and then sell some
of your property. This is then used to pay your debts.
• bankruptcy, where a person gives up control of their assets (items of value such as a car) and
finances, either voluntarily or by a court order. In exchange, the bankrupt person is given protection
from their creditors. You are not bankrupt until the Federal Court of Australia issues a sequestration
order. Only people can become bankrupt. A company is instead liquidated; this is when all its
assets are sold in order to pay its debts.

Impact of debt on wellbeing

CASE STUDY
How Toni became socially isolated
Having just left school, Toni applied for a credit card
to help manage the many costs of moving out of Toni’s debt caused her overall wellbeing to decline.
home to seek work. She used this credit card to
cover large expenses associated with the move,
including a bond of $1000 for the share house, her
share of four weeks rent in advance and the
purchase of a second-hand refrigerator. She intended
paying off a proportion of what she owed on her
credit card each pay day but difficulty finding work, a
lower than expected salary, larger than expected
living expenses plus accumulated interest owed from
borrowing the money soon became a problem.
Eventually, to manage her excessive debt, Toni
moved out of the share home into cheaper but less
desirable accommodation. She refrained from social
events including her hobbies and secured additional
shifts at
work to increase her weekly income. Toni progressively lost touch with her friends and family, had less
leisure time, a lower standard of living and more personal stress. Ultimately, she realised her general
wellbeing was declining.

44 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

Toni’s story is not uncommon. According to the Australian Securities and Investments Commission
(ASIC), at June 2017, 18.5 per cent of consumers were overwhelmed by their credit card debt load,
with outstanding balances totalling $45 billion. This represents one in six Australians (1.9 million
people) struggling to repay debt. Of these, young people were identified as a group of particular
concern.
Financial health and overall wellbeing are linked. Common signs of financial stress include high blood
pressure, sleeping difficulties, tiredness, mood swings, loss of appetite, headaches, arguing with people
closest to you about money, psychological stress (for example, feeling fearful) and withdrawing from
people. Changes of behaviour and mindset assist those who have been financially stressed to recover.
Strategies and actions to aid recovery include:
• creating a personal budget
• rolling all debts into one loan
• regularly depositing a little cash into a savings account
• setting aside money for emergencies
• being open to the idea of talking about money with those closest to you
• seeing if you can get a better plan with your bank or financial institution
• accessing financial assistance.

Resources

Digital document Worksheet 1.12 Problems of excessive debts — terms activity (doc-32686)

1.14 Activity: Research and communication

1. In groups, discuss strategies that Toni could have adopted to improve her wellbeing.
2. One strategy to improve wellbeing is to join local community or sporting groups. With a partner, use the
internet to create a database or spreadsheet of local community and sporting groups. Include the name of
the group, its contact details and a brief description of its aim.
3. Create an infographic or mind map showing possible consequences of failing to manage your finances. 4.
Research the fees and interest payable on credit cards presently offered by major banks in Australia. If Toni
had shopped around, would some credit cards have been better than others?

1.14 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
1. In your own words, what is the take-home message of the fable about the cicada and the ant?
2. Use the words in the list to complete the following sentences.
creditor sequestration relationships writ garnishee
(a) Excess debt may cause __________ to break down.
(b) A _________ is a person or business to whom you owe money.
(c) A __________ allows an employer or bank to take money from your wages or accounts and give it to your
creditors.
(d) A _________ of execution is a court order that allows a court official to seize and then sell some of your
property. Funds from the sale are then used to pay your debts.
(e) You are not bankrupt until the Federal Court of Australia issues a ________ order.
3. With the benefit of hindsight, how could Toni have managed her finances differently?

Fully worked solutions and sample responses are available in your digital formats.

TOPIC 1 Consumer and financial decisions 45

1.15 Importance of long-term financial strategies
When establishing a financial plan, it is very important to establish a set of goals. The three main types of
plans are short-term plans, where the goals are achieved in one to three years; medium-term plans, with the
goals achievable in four to six years; and long-term plans, where the goals are achieved in seven or more
years.

1.15.1 Funding retirement through superannuation

comp
The most common long-term financial goal
is to fund a comfortable retirement. Because ulsory
Australians are living longer, the savin
government is increasing the age that gs
people can access the aged pension to 67 accou
years. Even then, this pension will provide nt.
only enough funds for a very basic lifestyle.
Increasingly, people need to fund their own
retirement if they are to continue to enjoy
the standard of living they are accustomed
to. While people can adopt many investment
strategies over the long term to achieve this
goal — such as investing in real estate,
shares and managed funds — the most
common is superannuation.
Super
annua
tion is
simpl
ya
Superannuation (commonly just called ‘super’) is money that’s put aside and saved while you’re working.
A superannuation fund is a compulsory savings account where each time you are paid, your employer will
allocate a percentage of your income to the account. You may also want to pay additional money into your
account because this does have some tax advantages.
You should choose your own superannuation fund and not just accept the one the employer uses.
Your decision should be based on the fund’s fees and its history of returns. These vary considerably. It is
also very important to have just the one ‘super’ account because this will minimise your fees and
maximise your returns.

CASE STUDY
Leisa
Leisa was 22, had completed a media degree from The University
of Sydney and had just been accepted to work at a national media
organisation. She did not start for two weeks and during that time she
decided to get her administration in order.
Leisa had funded her own way through university by working
numerous
jobs, including waitressing, working as a kitchen hand, gardening and
even picking fruit for a short stint in the Riverina of NSW. She had never
taken any interest in superannuation and, each time she started a job,
had just filled out some papers and joined a new scheme. When going
over her superannuation paperwork, much of which she previously
hadn’t
even bothered to open, she discovered that she had joined six funds and
had paid a total of nearly $20 000 into her super. However, she was
 angry
when she found that five of the fund accounts had been closed due to
low balances and that the money had been transferred to the Australian
Tax Office.

46 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

Leisa was eventually able to retrieve the money and have it paid into her remaining account.
However, she had still lost a considerable sum in fees and lost interest.
When Leisa started work at the national media organisation, she told the HR department she wished to use
her remaining account as her superannuation fund. This
was quickly organised, and all future payments would
go into it.
Leisa enjoyed her new job but for a long time she was very angry with herself for losing that money in lost
fees and interest.
Having more than one superannuation account is very costly in fees.

Fees for one account Fees for multiple accounts

CASE STUDY
Megan and Tom
Megan worked in the human
resources department of a large
company and her husband Tom
was
a mechanic. They had been
married
for 30 years and had two
children.
They were fortunate in that, over
the years, they had always had a
financial plan. As part of this
plan,
they had always contributed as
much
as possible to their
superannuation
scheme.
Once they retired, they
 intended
to take this superannuation as a
lump sum and pay off their children’s
university debt and then invest the
rest in a combination of bank term
deposits, real estate and shares. This
they hoped would provide them with
more than enough to fund a very comfortable retirement. As they aged, they also planned to sell their large four
bedroom home and purchase a small apartment. The money left over from this could also be used to pay for
any aged care if needed.

TOPIC 1 Consumer and financial decisions 47

CASE STUDY
Sue and Ewan: time can mean more money
The following table shows the details of Sue and Ewan’s super accounts. Both are 60 years old. Sue has been
investing $2000 each year (less than $40 a week) while Ewan invests $5000 each year. The fund returns 8 per cent
on average over the years.

Sue Ewan

Starts investing at age 25 40

60

35 years

$2 000 p.a

$70 000

Invests until age 60

Investment timeframe 20 years

Investment per year $5 000 p.a

Total amount invested $100 000

Investment value at age 60 $372 204 $247 115

Source: UniSuper.
Even though the total Sue has invested is much less than what Ewan has invested overall, she is more than $125 000
richer. This is because she started investing at age 25 and Ewan started at 40. More time means much more money
when it comes to superannuation. This is because of compound interest. Compound interest, put simply, is when
you are being paid interest on the interest earned from your investment.

1.15 Activity: Research and communication

1. With a partner, visit a comparison site such as [Link] and determine which
fund would most suit Leisa.
2. Based on the three case studies, prepare a set of long-, medium- and short-term financial goals for yourself.

1.15 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to your
learnON title at [Link].
1. Use the words in the list to complete the following sentences.
employer seven retirement super fees 67
(a) A long-term financial plan is usually for _______ or more years.
(b) The most common long-term financial goal is to fund a comfortable __________.
(c) The federal government is increasing the age that people can access the aged pension to __________ years.
(d) Superannuation is commonly called ‘_____________’.
(e) A superannuation fund is a compulsory savings account where each time you are paid over a certain amount,
your _____________ will allocate a percentage of your income to the account.
(f) Your choice of superannuation fund should be based on the fund’s _____ and its history of returns. 2. Refer to the
case study of Leisa. Explain why Leisa was a very poor money manager. 3. Refer to the case study of Megan and
Tom. Describe why Megan and Tom could be considered to be wise money managers.
4. Refer to the case study of Sue and Ewan. Analyse the data in the table and explain why Sue had so much more
money in ‘super’ than Ewan, even though overall he had paid more into the fund.
Fully worked solutions and sample responses are available in your digital formats. 48 Jacaranda New Concepts in

Commerce Fourth Edition NSW Stages 4 & 5

1.16 Tools and strategies for effective

financial management
1.16.1 Importance of monitoring and record keeping
People who earn money may wish they could spend it on whatever they choose, but the reality is quite
different. Taxes and charges, bank fees, rent, mortgage payments and bills quickly take a large proportion of
the money we earn. These expenses are fixed expenses; that is, they are the same amount every time. For
example, on your mobile phone plan you may have to pay a minimum charge of $40 per month. Other
types of expenses are variable and change over time. For example, you may buy a jumper this month and
go to the movies next month. The secret to managing money is to keep accurate records of the money
coming into and out of your account, monitor your balance and minimise your expenses wherever possible.

CASE STUDY
Financial News interviews Sasha and Lizzy
Sasha and Lizzy are twin sisters who may
look the same but could not be any more forth — then with what is left, I buy fashion,
different when it comes to their finances. accessories, nice things for my flat. I also
Sasha has a good job with Telstra earning love to eat out and socialise with friends.
$1900 per week. Lizzy works as a manager Lizzy: The secret, umm, is to save money
in a retail store earning $1050 per week. Lizzy
Interviewer: What do you see as the and
‘secret’ of managing your money? Sasha:
Sasha –
Live for today! Don’t get me wrong, I don’t
spend money I don’t have. I earn the so
money first, but then I really, really enjoy alike,
spending it. I pay bills first — you know,
yet so
rent, petrol for my car, electricity and so
 differen
t!

so you can make your big dreams happen. I have a dream to own my own home. Everything I can save today
gets me closer to realising that dream. I opened a bank account to save for a home deposit and I love to watch
it grow each pay day. It’s even better when I see the interest on that money added to the bottom line. Gotta
love that!
Interviewer: How do you know what money goes into and out of your account?
Sasha: I never worry about that much. If I think I am spending too much, I look at the balance of my account
when I withdraw money from the ATM. I’m usually out shopping or socialising when I do that. All my other bills
are automatically deducted from that account each fortnight, just after pay day. So, if any money is in the
account when I go to the ATM, it’s there to be spent!
Lizzy: I’m very different from Sasha. I keep very detailed records. I keep a record each week of my income and
expenses, so I know exactly how much I’m saving. I also have a folder on my laptop where I keep records of all
my bank statements, pay slips, receipts and tax deductions. I like to be organised.
Interviewer: Can you share an example of the type of records you keep to manage your finances? Sasha:
Umm. Not really. I guess I let the bank do that for me because all I need to know is my bottom line.

TOPIC 1 Consumer and financial decisions 49

Lizzy: Sure. This is my record from last week. You can see that I was paid $1050, spent $570 and saved
$480. It was an unusual week really, because I went out to see a movie with a friend and needed to buy a
jacket for work. Most other weeks I manage to save an extra $50 because I do not need to buy clothes or pay
for entertainment.

Income Amount ($)

Salary $1050

Weekly expenses for Lizzy

Expenditure Amount ($)

Rent $220

Electricity $40

Phone $20

Food $100
 Train fare $120

Clothes $40

Entertainment $10

Internet $20

Total $570

Savings $1050 – $570 = $480

Interviewer: How often do you check the balance of your account?

Sasha: As I said, only when I’m withdrawing money from an ATM.
Lizzy: Monthly. When my saving and working bank statements arrive, I check the balance of each account
against the records that I keep. I find that task very rewarding.

1.16.2 Budgets
No-one wants the worry of overspending and ending up in debt. Through careful budgeting, you can make
sure your spending is not greater than your income. If your spending is too high or your income is too low,
you will need to cut back some of the things you would like to buy. Normally, you will find it easier to cut
back non-essential, variable expenses.
If you are still not satisfied, you will have to modify some fixed
expenses; for example, walk to work or school, and make your own
lunch. If you are not able to reduce your spending, you either have
to earn more income, borrow money or go without. Remember,
though, you should borrow only if you are certain you can make the
repayments.
If you are a compulsive shopper, you will need to monitor your
spending very carefully, especially if you use some form of credit.
Set up a budget, try to save on a regular basis no matter how small
the amount, keep accurate and up-to-date A budget should follow a number of steps.
records, monitor your spending and avoid
overcommitments. Following these practices 50 Jacaranda New Concepts in Commerce Fourth
will help you manage your finances Edition NSW Stages 4 & 5
responsibly and provide greater financial
security.
STEP 1 Calculate your total income
Calculate and record all the income you are likely to
receive. Your budget can be recorded either in a book
or as a computerised spreadsheet. STEP 4 Compare your total income with
your total expenditure
Calculate whether you have sufficient income to meet
your total expenses.
STEP 2 Record your expenses
Make a list of all your expenses. These should be
divided into two types: fixed and variable.
STEP 5 Assess your financial position
If necessary, modify your budget. This may mean
taking steps to reduce your expenses or to increase
STEP 3 Total your expenses your income.
Calculate and record the total of all your spending.
 TOPIC 1 Consumer and financial decisions 51
CASE STUDY
Talat Malik’s budget
Talat had just left school. She was studying at university and had a part-time job. She wanted to be sure that
she would have enough money to meet her expenses and to save a little in case of an emergency. She prepared
the following budget to help manage her finances.

Details Jan Feb Mar Totals

Income $100 $100 $100

$1000 $50 $50 $50

$100 $150 $150

$50
$200 $200 $200
$1050
$850 $900 $900

$400
Wages $3000

Interest $150

Total income $3150

Expenses

Rent $1200

Food $300

Phone $150

Electricity $400

Transport $600

Total expenses $2650

 Amount saved $200 $150 $150 $500

As shown in her budget, each month her total income was $1050, while her expenses were $850 in January
and $900 in the other months. This meant that in January she saved $200 and in February and March she saved
$150. After three months she had saved $500.
Talat was meeting her commitments and was able to save a little each month.

1.16.3 Savings plans

Russell rips open his first pay slip — his first wage of $84.50 has been paid into his bank account. Next
stop is the shopping centre where he buys a new video game and then a T-shirt that is ‘on special’. He
goes to the movies and buys some lunch. As he nears home, the reality hits him. Out of his $84.50, he has
only $3.50 left.
Russell has just learned a valuable Commerce lesson: you can do two things with money — spend it
or save it. Russell can, however, do both by spending some of his earnings responsibly and working out a
regular savings plan.
People save for many reasons, and these reasons change at different stages of life. For example:
• Teenagers might save for a laptop, a car or a big holiday at the end of Year 12.
• On leaving school, young people may wish to experience the excitement of living in an inner-city
location. The cost of living in such areas can be high, especially accommodation costs, and may make
it difficult to save. People living in remote rural communities also experience high living costs,
especially for food and household items, due to the added expense of transporting supplies to isolated
areas.
• Houses are so expensive that not many people can afford to pay cash for them. First-home buyers must
save for a deposit and arrange the rest through a loan.
• For wage or salary earners with children, the saying ‘saving for a rainy day’ means that it is important
to have some money saved in case illnesses, accidents or other emergencies affect them or their
dependants.

52 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

• Older people save for their retirement by putting funds aside in a superannuation plan. They want to
have a good lifestyle and to feel secure in their old age.
• Whatever a person’s age, saving money gives some people a sense of satisfaction and pleasure. When
they look at their savings balance, they feel a sense of achievement. Also, having access to savings and
not living from pay to pay reduces stress. Knowing that they can get by if an emergency arises
provides many people with a sense of security.

1.16.4 Superannuation
In Australia, superannuation is a compulsory savings scheme for retirement. Over your working life, you
pay into a fund and then when you retire, you receive either a large lump sum or a pension. You can
choose between two types of superannuation funds: a retail fund or an industry fund. These differ as
follows:
• Retail funds are usually run by banks or investment companies. They will offer many investment
choices but the company that owns them will also keep some of the returns as a profit. • Industry funds
usually offer less choice, but any profits are returned to the members. Originally, many industry funds
were trade union based. (Trade unions are organisations that represent employees and try to improve
their wages and working conditions.)
 Resources
Digital document Worksheet 1.13 The budget of Mario (doc-32687)

1.16 Activity: Research and communication

1. Using a computer spreadsheet, record all your income and spending over a two-week period.
(a) What was your balance for each week?
(b) Were you satisfied with how you managed your finances?
(c) Predict changes you could make over the next three months.
(d) What changes would you make if you wanted to increase your savings?
2. With a partner, use the internet to research two industry superannuation funds and two retail superannuation
funds. Compare the fees and returns from these funds.

TOPIC 1 Consumer and financial decisions 53

1.16 Exercise: Knowledge and understanding
To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
1. Explain the difference between fixed and variable expenses. Give two examples of each.
2. Refer to the case study of Sasha and Lizzy.
(a) Which sister earns the most money?
(b) Which sister spends the most?
(c) What problems could arise from Sasha spending most of her income? Suggest ways in which Sasha
could reduce her spending.
(d) Describe Lizzy’s financial plan.
3. Construct a flow chart that shows the steps in preparing a budget. If possible, use the drawing tools on your
word processor to assist in this process.

1. Calculate your income

4. Study the following budget for Nina Rossi and then answer the questions.
 Details January February March Totals

Income $200 $200 $200

$2000 $50 $50 $50

$100 $100 $100

$0
$200 $200 $200
$2000
$1050 $1050 $1050

$500
Wages $6000
Interest $150

Total income $6150

Expenses

Rent $1500

Food $600

Phone $150

Electricity $300

Transport $600

Total expenses $3150

Amount saved $950 $1100 $950 $3000

(a) In which month did Nina expect to have the highest total income?
(b) What is Nina’s biggest expense?
(c) At the start of April, Nina wished to go on a holiday to Bali costing $2500. Would she be able to afford
this? Explain your answer.
5. (a) Using a spreadsheet program such as Excel and the data provided, prepare the budget for Ali Khan for
the months of January, February and March. Be sure to place equations where appropriate so that any
changes will automatically update your answer. Use the budget in the previous question as a guide. Data for
Ali Khan: wages $1500 in each month, interest $100 in February only, rent $400 in each month, food $250 in
each month, phone $50 each month, electricity and transport are both $100 in each month.
(b) The government increased the cost of bus travel. This changed Ali’s transport costs to $200 in each
month. How did this affect his total amount saved?
6. What two things can you do with your income?
7. What are the two main types of superannuation funds? Explain an advantage of each.
Fully worked solutions and sample responses are available in your digital formats.

54 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

1.17 Options for addressing financial

difficulty 1.17.1 Personal loans
In Australia, customers can access personal loans from:
• banks (for example, ANZ Banking Group, Commonwealth Bank of Australia, National Australia Bank
and Westpac Banking Corporation)
• credit unions
 • building societies
• other financial institutions (for example, finance companies).
While none of these lending organisations is government owned, all are supervised by the Australian
Prudential Regulatory Authority (APRA). Regulation requires these lending organisations to offer services
to assist customers to get the best possible outcome from their choice of loan product and thereby reduce
financial stress. Typically, these services take the form of information, tips and tools as well as access to
teams of financial advisors and counselling specialists.

APRA

APRA oversees banks, credit unions, building

societies and other financial institutions to
ensure they remain financially sound.

Consumers

Once you have a personal loan, you begin making regular repayments to your credit provider. The
amount of each repayment is based on the sum borrowed, the term (length) of the loan and whether
the interest rate is fixed or variable. Fixed interest rates stay the same throughout the term of the loan
(for example, 2 per cent over five years). Variable rates will change over the period of the loan.

1.17.2 Negotiating alternative payment plans

Should someone experience difficulty with their repayments due to unforeseen circumstances (such as
illness or unemployment), they have the right to apply to their credit provider for a hardship variation.
This requires them to:
• Contact the provider of the loan.
• Tell them about the need to vary the loan contract because of hardship. (This is set out in Section 72 of
National Consumer Credit Code.)
• Explain why they are having difficulties, how long they think their financial problems will continue
and how much they can afford to repay.

TOPIC 1 Consumer and financial decisions 55

A number of choices are available if you have to vary your loan due to hardship; these include:
• extending the loan period
• making smaller repayments over a longer period
• postponing repayments for an agreed period.
Other options include selling assets and only paying the interest on the loan (rather than also reducing the
principal or amount borrowed).
While changing payment plans may incur fees, it is better than just ignoring the problem. If a borrower
continues to skip repayments, the finance provider is entitled to foreclose on the loan. This means they
can seize the borrower’s assets and sell them to recover the money.

CASE STUDY
Ajay experiences hardship meeting car loan repayments
Since leaving school, Ajay worked
night shifts at a mine located 30 kilometres outside his
town. Because he did not want to rely on friends and
family for transport, he decided to buy a car.
Ajay took out a personal loan with one of Australia’s big
banks. He borrowed $10 000 over five years on a 10 per
cent fixed interest rate. Within 12 months of taking out
the car loan, the mining industry took a downturn and
Ajay was retrenched. Due to his period of
unemployment, Ajay had
difficulty meeting his monthly loan repayments. He made
an appointment to speak to an advisor at the bank. He
described how his retrenchment and the difficulty
Ajay renegotiated his personal loan with the bank.

finding another job had made it impossible for him to meet his next monthly repayment. He asked if he could
change the term of his loan from five to seven years so, although it would take him longer to pay off the car, his
monthly repayments would be smaller. He also wanted to know if the fixed interest rate agreed upon a year earlier
could be changed to the lower interest rate of 5 per cent now advertised by the bank.
Although he had to pay a small fee to change his plan, Ajay took the advice of his bank’s financial advisor.
The new plan was for a secured loan of $8000 over seven years at 5 per cent interest. The security for the loan
was the car itself.
After four months without an income, Ajay secured work interstate as a fly-in fly-out miner. Because his new
job had a higher salary and the living expenses associated with the new job were lower, he paid off his car loan
well inside the seven-year term.

1.17.3 Seeking support

In addition to the support offered by lending institutions, a range of other services and service organisations
can help you negotiate loans and alternative payment plans. These support services are summarised in the
following diagram.
People who find themselves in financial difficulty have several options available to them to get help.
Those who prefer to ‘go-it-alone’ can choose to access reliable information, factsheets, tips and tools to
help them resolve the difficulty on their own. This includes resources provided online by the Australian
Securities and Investment Commissions (ASIC); for example, through [Link].

56 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

People experiencing financial difficulty can access support from many

sources. Financial support services

tips and tools associated with institution

Assisted support your financial
from specialist institution Assisted support
financial from free
Independent
advisors, Assisted support government
research of
counsellors or from customer or community
online financial
lawyers not service personnel counselling
information,
directly at your financial services
factsheets,

People who are less confident to address their own difficulties or face very complex issues can access
support from other people. These people include:
• Specialist financial advisers, counsellors and lawyers who are not directly associated with your
financial institution. Using independent services of this kind will incur a cost.
• Customer support and services personnel directly associated with your financial institution. These
services are usually at no-cost to customers because they are factored into the price of the financial
product (for example, the loan plan) the customer has bought.
• Counsellors at government or community agencies, many of whom provide services for free or at low
cost. For example, the National Debt Helpline offers free step-by-step guides to fix common debt
problems as well as free, independent telephone counselling.
The best choice is the option of ‘best fit’. For example, a young person applying for a hardship variation
on a car loan is more likely to opt for the no-cost, or low-cost, service not directly associated with their
bank.

Resources
Weblink MoneySmart

1.17 Activity: Research and communication

1. Work with a partner to compose an informed reply to the following social media post:
Hi. I am hoping someone can help me. I have taken out a loan with a credit union and I simply cannot
keep up with my repayments. What should I do?
2. Imagine you have a loan for $20 000 and have just been retrenched. Research the websites of the major
banks to identify how each may be able to help in this situation.

1.17 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
1. State whether the following are true or false.
(a) Personal loans in Australia are only provided by the ‘big four’ banks.
(b) In Australia, consumers of personal loans have the right to negotiate a hardship variation.
(c) Credit providers in Australia are supervised by a regulatory authority.
 (d) It is better to seek help with financial difficulties sooner rather than later.
2. Use the words in the list to complete the following passage.
amount credit interest term
The size of repayments on a personal loan depends upon the __________ borrowed, _________ rate and the
_________ of the loan. These variables are negotiable with a _______ provider.

TOPIC 1 Consumer and financial decisions 57

3. Refer to the case study ‘Ajay experiences hardship meeting car loan repayments’.
(a) Explain why Ajay needed a vehicle.
(b) Describe how Ajay was able to repay the loan early.
(c) Compare the terms of Ajay’s loan before and after the re-negotiation due to hardship. 4. Outline
some of the sources of support that people experiencing financial difficulty can seek out.
Fully worked solutions and sample responses are available in your digital formats.

1.18 Impact of technology on consumer decisions

The methods that consumers use to pay for goods and services have constantly changed over time. Most of
the changes are due to the impact of technology.

1.18.1 Barter
Before coins and notes were used, a system called Barter — an early method of payment
barter existed. Barter was swapping or exchanging
one good for another. Barter still exists in some parts
of the world.
However, there are a number of problems with barter.
Trying to calculate the value of an item is difficult.
Finding someone who wants what you have and has
what you want is known as ‘double coincidence of
wants’.
The development of money overcame the problems of
barter.

1.18.2 Money

Money — anything people generally accept as payment in exchange for goods and services — gave
consumers greater freedom in satisfying their needs and wants. Earlier societies used items they valued,
such as gold, shells, rum, salt, cattle or even coloured stones, as money. They were scarce or rare and
accepted by everyone as a form of payment.

Evolution to a cashless society

Teenagerus
cointoter

Tennagerus
electronicus

Teenagerus
bartermuch
58 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

1.18.3 Impact of technology phone is becoming an extension of the purse or

wallet.
Developments in computer technology have virtually
turned Australia into a cashless society. The modern
consumer typically prefers to use electronic transfer
both to receive money and to pay for purchases. Some Simply ‘tap and go’ to make a quick electronic payment
of the current technological methods that can be used
to make electronic (cashless) payment include:
1. Visa payWave and MasterCard PayPass. This ‘tap
and go’ technology allows for payments of under
$100 simply by tapping your debit or credit card,
keyring or mobile phone against a
specialised contactless terminal.
2. Smartphone apps. There are numerous apps such
as Apple Pay, Google Pay and Samsung Pay. These
are aimed at allowing consumers to make mobile
credit card payments using smartphones. The mobile

When using any new technology to make payments, it is important to remember the safety issues
involved with electronic transactions. Keep track of your spending by checking your statements regularly
and contacting your bank if there are irregularities.
Financial institutions are structuring their transaction fees and charges to encourage customers to adopt
electronic banking.

COMFACT
According to Chinese historians, China was the first country to issue paper money. Called ‘flying notes’ their use
was first recorded about AD 800.

Resources

Digital document Worksheet 1.14 SWOT analysis (doc-32688)

1.18 Activity: Research and communication

1. Using your library and the internet, research an early form of money. Find out where and when it existed,
who used it and what it was like.
2. As a class, discuss the advantages and disadvantages of using smartphone apps such as Apple Pay and
Google Pay as a means of buying goods.

1.18 Exercise: Knowledge and understanding

To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].
1. What is barter? Describe some of the problems associated with barter.
 2. What is money? Name some of the things that earlier societies used as money.
3. Where and when was the first paper money issued?
4. Name two common payment cards that use tap and go technology.
5. Name two common smartphone apps consumers can use when purchasing goods.
6. How might older Australians be disadvantaged by the trend towards payments with smartphone apps?
7. What problems could arise from people paying bills electronically?
Fully worked solutions and sample responses are available in your digital formats.

TOPIC 1 Consumer and financial decisions 59

1.19 Thinking Big research project: Smart

financial management
1.19.1 Scenario
You are an experienced financial adviser and a client has come to you looking for advice on how to
maximise her financial situation. Madison is a young professional who is planning her wedding, which is
to be held in four months time. Madison and her fiancé, Taylor, are planning to buy a house within the
next two years. Madison’s job as a Function Coordinator is well paid and she prides herself on being very
well organised not only in her personal life, but also in her money management. In your role as a financial
adviser, you must take into account your client’s short, medium and long-term financial goals, before
making a recommendation.

1.19.2 Task
Madison has a number of goals with varying time frames for achievement. To offer her sound advice, you
will need to gather information from a variety of sources about different types of credit cards, personal
loans and term deposits. You are provided with information about Madison’s financial situation, her goals
for the future and a video interview with Madison. You must provide Madison with a recommendation on
how she should proceed in order to reach her goals.

1.19.3 Process
1. Form a group with other members of your class. Open up your ProjectsPLUS application for this topic,
located in the Resources tab. View the Project Brief and then click the ‘Start new project’ button and
set up your project group. Save your settings and the project will be launched.
2. Navigate to your Media Centre, and open the ‘Monthly Budget for Madison McMulligan’ template.
Using the spreadsheet template provided, you must complete a monthly budget for Madison using
the information below. Ensure you use correct formulas to calculate the totals. Print the budget once
you have completed it and make sure that you submit this with your final project.
 Madison is a Functions Coordinator for a luxury international hotel and earns a salary of $50 000 net. She
is lucky that she lives at home; paying her parents $100 a week for board. She has recently bought a new
car and has a monthly repayment of $280. In addition to this, she pays $70 a month for her car
insurance. She has calculated that every month she spends about $200 on fuel and car maintenance.
Madison eats
out for lunch every working day, on average spending about $15. She has also calculated that she spends
about $400 a month on clothes and about $200 on entertainment. Added to these expenses is the cost of
a mobile phone on a $75 monthly plan and a private health insurance plan that costs $47 a month.

60 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

3. Help Madison to finance her wedding, based on the following information:

Madison is yet to save any money at all towards her wedding. The wedding planner has estimated that
this most important day will cost about $14 000 in total. Madison and her fiancé will share the cost
equally.

Look at the budget you created for Madison and calculate how much money she could save in
the next four months. Navigate to the Media Centre and open the ‘Recommendations to Madison
McMulligan Template’. Refer to Part 2 of the template and outline how much money you believe
Madison could save, as well as your recommendations for some cutbacks in Madison’s expenses.
4. If she looks like running out of time, she may need to find another source
of finance. Use the internet to find a range of credit card and personal loan
options for
Madison and enter your findings as articles under these topics in your
Research
Forum. Refer to the weblinks provided in the Media Centre to get you
started.
You can view and comment on other group members’ articles and rate the
options they have entered. When you have decided on the best credit card
and
best personal loan, refer to Part 3 of the ‘Recommendations to Madison
McMulligan Template’. Complete the table provided and then make
recommendations on what Madison should do to finance her wedding.
5. After the wedding, Madison and Taylor will be concentrating on saving
their
pooled money to buy their first home. As their financial advisor, your role
is to
propose the best type of term deposit. Research the term deposit options
that are
currently available from Australia’s lending institutions and enter your findings
as articles under the ‘Term Deposits’ topic in your Research Forum. Refer to
the weblinks provided in the Media Centre to get you started. Rate and comment on
the options that have been entered. As a group, decide on the best option and then
refer to Part 4 of your ‘Recommendations to Madison McMulligan template’ where
you will need to propose and justify which term deposit Madison should use.
6. Print the Research Report, Monthly Budget, and Recommendations to Madison
McMulligan documents and submit them to your teacher.

Resources
ProjectsPLUS Smart financial management (pro-0132)
 1.20 Review
1.20.1 Summary
Having explored this topic, you can now:
• understand what a consumer is and the types of decisions they need to make in order to satisfy their
needs and wants
• list the key factors affecting consumer decisions — disposable income, price, advertising/marketing,
age, gender, social media, culture, convenience, environment and customer service — and understand
that, when comparing prices of various goods, we should try to compare the ‘per unit price’
• identify that comparison shopping is when we shop around to obtain the best deal, and that we need to
look at aspects such as price, quality, availability and after-sales service
• compare goods and services from a huge number of options, including convenience stores, department
stores, discount stores, supermarket/hypermarkets, specialty stores, market stalls, mail order, door to
door, auctions, telemarketing, vending machines and, increasingly, through the internet
• understand consumer choices when paying for goods and services, including cash, credit cards, debit
cards, BPAY®, electronic fund transfer, direct debit, cheque, lay-by, afterpay or book-up

TOPIC 1 Consumer and financial decisions 61

• understand when firms are acting in an honest, trustworthy and ethical manner and when consumers
could be victims of scams or rip-offs
• identify the two important pieces of legislation that try to prevent businesses acting dishonestly — that
is, the Competition and Consumer Act 2010 (Cwlth) and the Fair Trading Act 1987 (NSW) • determine
the main features of a simple contract — the offer, acceptance and consideration • identify the basic
consumer rights and understand that while some protective legislation exists to ensure these rights —
namely, the Competition and Consumer Act 2010 (Cwlth) — it is still important for the buyer to beware,
or ‘caveat emptor’
• suggest some organisations that may help if consumers need assistance, including the NSW
Department of Fair Trading, an industry ombudsman, ASIC, ACCC, Choice, the media and the NSW
Civil and Administrative Tribunal
• describe the consequences of poor financial management, including excessive debt and the effect on
wellbeing
• describe the importance of long-term financial strategies, including the need for monitoring,
record-keeping, budgets, savings and superannuation
• explain the various options available for anyone experiencing financial difficulty
• describe how technology has changed the payment process.

1.20.2 Key terms glossary

acceptable quality a product fit for purpose, acceptable in appearance and finish, free from defects, safe and
durable
acceptance when the offeree agrees to the proposal
assets items of value
bankruptcy when a person gives up control of their assets and finances, either voluntarily or by a court order
barter the swapping or exchanging of one good for another
book-up a charge account operated by a trader
budget a list of income and likely expenditures
capital goods used to make other goods
caveat emptor a term meaning ‘let the buyer beware’
 cheque a written communication ordering your financial institution to pay a person a specific amount of money
commerce the buying and selling of goods and services between individuals and businesses comparison
shopping contacting (by telephone, internet or in person) a number of sellers to obtain the best deal
consideration the giving up of something of value
consumer someone who purchases goods and services to satisfy needs and wants
consumer guarantees a set of rights and remedies for defective goods and services
contract a legally binding agreement
creditors people you owe money to
debt money owing to external sources; e.g. a bank
disposable income the amount of money that households have available for spending and saving after income
tax has been deducted
distribution chain the ways of getting the product to the customer
drawee the financial institution that provides cheque account facilities
drawer the person who writes and signs a cheque
durable goods items that can be used many times
e-commerce the buying and selling of information, goods and services via the internet
e-tailer electronic retailer
EFTPOS electronic funds transfer at point of sale
electronic transfer the transfer of funds from one account to another via the internet or telephone enterprise a
project or undertaking that may relate to a business, organisation, community or government agency fixed
expenses expenses that are the same amount every time — for example, monthly rent, or a minimum charge of
$40 per month for a mobile phone
garnishee a court order that allows an employer or bank representative to take money from your wages or
accounts and give it to your creditors
goods items that you can see or touch

62 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

impulse buying buying something without giving much thought as to whether you really need it
income money received on a regular basis from work, property, business, investment or welfare
interest the price that must be paid in order to use someone else’s money
labour the human skills and effort required to produce goods and services
land naturally occurring resources, such as forests, coal and fertile soil
liquidated where all company assets are sold in order to pay the company’s debts
mail order to buy products, via catalogues, for delivery by mail
manufacturer a person or business that makes goods
money any token, with an agreed value, that people accept as payment in exchange for a good or service
needs things that are necessary for survival, such as water and food
non-durable goods items that can be used only once
offer a proposal
online shopping purchasing products over the internet
opportunity cost what you have to forgo if you choose to do A rather than B; the value of the next best
alternative that is forgone whenever a choice is made
payee the person who is to receive the money from a cheque
price the amount of money a consumer is prepared to offer in exchange for a good or service
profit what remains after all business expenses are deducted from sales revenue
redress to set right
retailer a business that sells products directly to consumers
rip-off to overcharge or swindle
scam an illegal business practice
sequestration order an order from the Federal Court of Australia declaring an individual bankrupt
services things done for you by others
superannuation money set aside during your working life for retirement; commonly called ‘super’ trade
union organisation that represents employees and tries to improve wages and working conditions
unconscionable act any practice by a seller that is just not reasonable and often illegal
variable expenses expenses that change over time, and do not occur on a regular basis. For example, a person
may go to a music concert this month to hear their favourite singer and buy a computer game next month wants
things that are not essential for survival but that we would like to have
wholesaler buys goods in large quantities from the manufacturer
writ of execution a court order that allows a court official (the sheriff) to seize and then sell some of your property
 Resources
Digital documents Key terms glossary (doc-32664)
Match up (doc-32750)
Crossword (doc-32784)
Wordsearch (doc-32795)
Interactivities Wordsearch (int-7898)
Crossword (int-7881)

1.20 EXERCISE
To answer questions online and to receive immediate feedback and sample responses for every question, go to
your learnON title at [Link].

1.20 Exercise 1: Glossary quiz

1.20 Exercise 2: Multiple choice quiz
1. Which of the following terms best describes the process of contacting different sellers to find the best price
for a product or service?
A. Price shopping
B. Product shopping
C. Window shopping
D. Comparison shopping

TOPIC 1 Consumer and financial decisions 63

2. What is the Latin term meaning ‘let the buyer beware’?
A. Careful emptor
B. Caveat emptor
C. Caveat empty
D. Caviar emperor
3. What three essential elements make a legally binding contract?
A. The offer, the acceptance and the consideration
B. The offer, the handshake and the consideration
C. The offer, the acceptance and the cheque
D. The proposal, the handshake and the cheque
4. What is buying things without giving much thought as to whether you really need them?
A. Impulse buying
B. Having too much money
C. Urge buying
D. Instinctive buying
5. One problem with bartering was the need for a ‘double coincidence of wants’. What does this mean?
A. Finding two people who want the same good.
B. Finding someone who wants what you have and has what you want.
C. Finding twins who coincidently want identical items.
D. Finding two people who coincidently want what you have.
6. Which of the following is an advantage of a credit card?
A. It is easy to overspend.
B. They are a convenient payment method for online transactions.
C. They are often more expensive than other forms of credit.
D. Missing a monthly repayment will affect your credit rating.
7. Since January 2011, a single consumer law has been in force across Australia. It ensures that when you
buy products and services they come with automatic guarantees that they will work and do what you
asked for. What is this law called?
A. Australian Goods and Services Law (AGSL)
B. Australian Consumer Law (ACL)
C. Australian Fair Trading Law (AFTL)
D. Australian Fair Price Law (AFPL)
 8. A common scam is referral selling. What does this usually involve?
A. The consumer being offered a ‘special deal’ if they pay in cash.
B. The consumer being offered a ‘special deal’ if they buy the product and provide their names as referees
for the shop assistant.
C. The consumer being offered a ‘special deal’ if they buy the product and provide names of potential
customers.
D. All of the above.
9. Which of the following is an advantage of using a debit card to purchase goods and services?
A. You use a financial institution’s money and are charged interest.
B. You use your own money and pay no interest.
C. You may spend up to your credit limit.
D. You use a financial institution’s money but they do not charge interest.
10. In Australia, which of the following describes a compulsory savings scheme for retirement?
A. A credit card
B. A personal loan
C. A term deposit
D. A superannuation scheme

64 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5

1.20 Exercise 3: Knowledge and understanding
1. Complete the statements by selecting the correct word from the list below.
budget consumer durable wants services need goods consumer guarantees (a) A _________________ is someone
who purchases goods and services to satisfy needs and wants. (b) Something that is necessary for survival is called
a _________________.
(c) _________________ are not essential for survival but are the things we would like to have. (d) Items that you can
see or touch are called _________________.
(e) _________________ cannot be touched but are provided for you by other people.
(f) A financial plan is called a _________________.
(g) A _____________ is a type of good that can be used more than once.
(h) _____________ _____________are a set of rights and remedies for defective products. 2. Draw a diagram to show
the distribution process from the manufacturer to the consumer. 3. Outline the situations where the following is the
most appropriate means of purchasing goods. (a) Mail order
(b) Internet shopping
4. What are the main elements of a simple contract?
5. Carefully study the following illustration.
(a) Fill in the empty boxes using the image as a guide.
(b) Explain how each practice helps a person to become a wise consumer.

Practices of a wise consumer

Understands the
meaning of caveat
emptor
Avoids
impulse buying
Knows about
NSW Fair Trading

Knows their basic

consumer rights

6. Outline the role of the NSW Consumer Administrative Appeals Tribunal (NCAT).
7. Explain the difference between a credit card and direct debit.
8. What are the advantages of keeping an up-to-date record of your purchases and payments? TOPIC 1 Consumer and

financial decisions 65

1.20 Exercise 4: Challenge your understanding

1. Explain why needs and wants vary between:
(a) people in the 1890s and people today
(b) a teenager living in regional NSW and an elderly person living in Sydney
(c) a middle-aged executive earning $400 000 a year and a young sales assistant earning $40 000 a year.
2. Research the changes that have occurred in the way we shop. Present your information by completing the
following timeline.

Middle Ages Online

 5th–15th century 21st century

3. Explain how specialty stores are able to exist in competition with large department and discount stores.
4. Find three examples of persuasive advertisements and paste them in your notebook. Under each one,
explain how the advertisement might influence the consumer to buy the product.
5. Read the article ‘Supermarket shopping — at your convenience’ then answer the questions that follow.

Supermarket shopping — at your convenience

As you enter the supermarket you encounter your first obstacle: a shopping trolley with a mind of its
own. After taming the ‘beast’, you set off cautiously, for you have entered into a game of enticement
where the retailer has cleverly set traps to ensnare the unsuspecting consumer. Traps pepper your
journey, such as music, lighting, pleasant aromas from the bakery, eye-catching display techniques
and, worst of all, the rearrangement of the store to divert you to new aisles. After dodging the
tempting specials, you make your way to the checkout. Which aisle to line up in? The ‘express’ aisle
moves at a snail’s pace and the self-service counter is extremely busy. Never mind, just pick up (and
later purchase) a magazine while you wait — another trap. With the trolley unloaded, and goods
scanned and bagged, you now take a leap of faith and hope the EFTPOS transaction is accurate.
Leaving, you push the errant trolley to your car, once you remember where you parked it. You breathe
a sigh of relief. How can this be called ‘convenient’?

(a) Do you agree with the sentiments expressed by the writer? Give reasons for your answer.
(b) Is this article based on fact or impression? How can you tell?
(c) Investigate and report on the changes that have occurred in supermarket shopping over the last 50
years. Why have these changes occurred and who has benefited, the consumer or the retailer? 6. List and
explain some techniques retailers use to tempt us into impulse buying. The first one has already been
completed for you.

Techniques used by retailers to encourage impulse buying

Technique Explanation
1. ‘Sale’ prices You think you are getting a good bargain.

7. Prepare a database or spreadsheet of organisations that provide advice for people who are experiencing
financial difficulties.
8. Explain how consumer guarantees provide some protection for a consumer.
66 Jacaranda New Concepts in Commerce Fourth Edition NSW Stages 4 & 5
9. Write a story in which you imagine that you are unable to
pay your mobile phone account. Explain how you came to
be in this position and what you plan to do.
10. Answer the following questions:
(a) What does the term ‘plastic money’ mean?
(b) What are some advantages and disadvantages
of using debit cards?
(c) Why is a debit card better than a cheque for
both the consumer and business?
(d) Will cashless shopping create any difficulties
for society? Explain your answer.
11. In small groups, construct a flow diagram to
indicate the steps involved in using an ATM.
12. Does the law provide sufficient protection to
consumers who buy goods and services online or
by the telephone? Explain your view.

Fully worked solutions and sample responses are available in your digital formats.

Resources
Digital documents Worksheet 1.15 Wrap up! (doc-32689)
Glossary quiz (doc-32762)
Multiple choice quiz (doc-32773)
eWorkbook Customisable worksheets for this topic (ewbk-0858)

Test maker
Create unique tests and exams from our extensive range of questions, including quarantined topic tests.
Access the Assignments section in learnON to begin creating and assigning assessments to students.
TOPIC 1 Consumer and financial decisions 67