Econ Chapter 1
Section 1- Decisions, Decisions
You Have The Power
★ “The customer is always right”
★ Our wants, needs and values as consumers help manage the flow of
the economy and businesses
★ Values are our principles or standards
○ Life Values- fundamentals that guide a person’s actions,
decisions and overall outlook on life
○ Work values- beliefs that are important to you in the workplace
○ Cultural values- core beliefs that guide a community or society
○ Social values- what defines what is acceptable and unacceptable
in a society and shape how people behave
○ Demographic values- statistical characteristics of a population
(race, age, income, location)
★ Our values may change as we grow!
Goals, Needes, and Wants
★ Goals are things we want to accomplish
○ Goals we set give us guidance about how we want to set up our
futures
★ Needs are the things you cannot live without
★ Wants are things that you would like, but can live without
The Lifespan Plan
★ The things you want in life will change as you age
○ There will be important events that happen in your life that
make up ur life cycle
★ While you are young, you will set long term goals you want to achieve
★ Lifespan goals are the most important long term goals you hope to
achieve
★ Short term goals are things you hope to achieve within 1 year
Opportunity Cost
★ When you have to figure out which of your wants is more important,
you will give up the other thing that you decide not to do.
★ Opportunity cost is the value or the alternative that you choose not to
do
★ Your opportunity cost is always equal to others
Section 2- Financial Decisions
Decision Making process
★ 5 steps to making a decision
★ Rational Buying Decisions- a choice made in an organized or ideal
manner
1. Specify
★ Is the good you crave a need or a want?
★ Does this purchase fill the goals you were looking for?
★ Were you able to purchase this without going against your
values?
2. Search
★ Make sure to plan out your searching process
○ A strong plan leads to a smarter purchase
★ Avoid making impulsive purchases
3. Sift
★ Consider all of your options
★ Wrong decision can cost extra
★ Evaluate your opportunity cost
4. Select and 5. Study
★ Buying process is complete
★ Learn from this process
Section 1, Chapter 3
Production and resources
★ Production- combining various inputs, like labor, materials and capital
to create a product or service
★ Resources- services or assets that are used to produce goods and
services to meet needs and wants
★ Every nation has some type of economic system that it follows
Economic Systems
★ Every country may be different varying on the economic strategy they
follow
★ Economic- the study of how societies make use of the resources they
have
Types of Economic Systems
★ Traditional Economy
○ Driven by time-honored beliefs
○ Skills and traits passed down from generation to the next
○ Rely on agriculture, gathering, hunting and fishing
○ Trade based barter system
★ Command Economy
○ Run by a centralized government
○ Government decides what to make and how much to make
regardless of need or want
○ All production is set by government ( color, price, style, etc.)
★ Market (Capitalist) Economy
○ Driven by supply and demand
○ Minimal government control
○ Based on voluntary exchange
○ Individuals are free to make best options for themselves
○ Profit is the ultimate goal for businesses
★ Mixed Economy
○ Blend between command economy and market economy
○ Government has some control, but not on
○ “Mixed” countries can decide if they are more “market” or
“command”
Scarcity
★ An economic concept that describes when a demand for a good or
service id greater than its availability
★ Resources are limited, we have to decide what to use them on
★ Your choices create the market for supply and demand
Chapter 1, Section 4
Consumer Role In the Economy
Choices company scan make when trying to gain more customers
★ Lower prices so they can compete with other businesses for
customers
★ Convince customer to pay higher prices for the same product as other
companies
★ Stop offering the product for sale and put something new on the
shelves
Ways companies can increase profits
★ Reduce costs
★ Attempt to change prices
★ Attempt to increase products sold
Benefits of competition
★ Competition- contest among sellers to win customers
★ When several companies offer similar products for sale
★ Heart of Economy! Forces businesses to serve customer they way we
want them to
Consumers in charge!
★ 200 years ago, Adam Smith described Consumer Sovereignty
○ Sovereignty means to be in charge
○ Smith argues consumers control the economy
○ Invisible Hand!
Efficiency and Profits
★ Profitable company does..
○ Selling products consumers want to buy
○ Selling products at a price consumers are willing to pay
○ Taking in more money from sales compared to what the
company spend to produce the product
Chapter 1, Section 5
Ads and Consumer decisions
Advertising- a paid form of communication sent out by a business
describing a product or service
Types of advertising
★ Brand Advertising
○ Cause you to remember a brand name
○ Jingles and slogans
○ Associate product quality with brand
★ Informative advertising
○ Designed to inform you about a products benefits
○ Do not include downsides
★ Comparative advertising
○ Convince to buy one companies advertised product over another
competing product
○ Learn a product best qualities form this ad
○ Shows competitors weakness
★ Defensive Advertising
○ Responds to claims other businesses make about a product
○ Ad tries to convince you to buy one product over another
★ Persuasive Advertising
○ Appeals to your emotions
○ Does not provide much information
○ Create a desire within you to buy a product instead of rational
thinking
Deceptive ads vs Puffery
★ Deceptive ads are designed to mislead consumers
★ Puffery is an innocent exaggeration
★ Puffery is legal, deceptive ads are illegal
★ Gov can fine businesses who have deceptive advertising