CHAPTER 3 Resource Manager CHAPTER 3 ... - SL Economics1. consumer 2. bait and switch 3. warranty 4. informative advertising 5. discretionary income 6. ethical behavior 7. consumerism

Assessment and Evaluation

Spanish Economic Concepts Transparency 12

Spanish Vocabulary Activity 3

Spanish Reteaching Activity 3

Spanish Section Quizzes for Chapter 3

Spanish Chapter 3 Audio Program, Activity, and Test

Spanish ResourcesReading for the Student

Day, Nancy. Advertising: Information or Manipulation?Berkeley Heights, NJ: Enslow Publishers, 1999. Analysis ofthe methods used to persuade consumers to buy.

Multimedia MaterialYour Consumer Rights, 1996. Learning Seed, 330 Telser

Road, Lake Zurich, IL 60047. VHS. Explains how con-sumers’ rights are protected in the marketplace.

Additional Resources

Vocabulary PuzzleMaker Software

Interactive Tutor Self-Assessment Software

ExamView® Pro Testmaker

NBR Economics & You Video Program (English/Spanish)

Presentation Plus!

Glencoe Skillbuilder Interactive Workbook CD-ROM,Level 2

Interactive Lesson Planner

MindJogger Videoquiz

Interactive Economics! CD-ROM

Audio Program (English or Spanish)

Technology and Multimedia


PROCEDURE

1. Discuss the following with the class: What is a warranty? (Many students may volunteer that a warranty is aguarantee.) What products are likely to have warranties? (Students might suggest small appliances, a car, a wordprocessor/computer, luggage, etc.) Why should one compare warranties? Does the warranty raise the price?What exactly does the warranty cover? If repairs are included in the warranty, does the consumer need to shipthe product to the place of repair and, if so, who is to pay shipping costs?

2. Organize the students into small groups and give each group a warranty. Students should read, locate, andexplain the following: What is covered by the particular warranty? How long does the warranty last? What kindof warranty is it? (full, limited, extended, etc.) Are there any restrictions, limitations, or exceptions? Does yourstate have any special laws that give additional rights? Is product registration necessary? Are there words in thewarranty that you do not understand?

3. Reassemble the class. Distribute pictures of products or have students select pictures from a hat. Have each student write a warranty for his or her product and exchange it with another student for evaluation. Evaluatingstudents will then try to understand the warranty and explain to the class in an oral presentation what the “seller” is offering.

4. Organize the class into groups of three to five students each. Give each group the name of a product and the following instructions: One individual in each group will be the consumer asking questions about price andwarranty while the others will play the role of clerks in various stores. Clerks will play their roles as follows:

a. Specialty store clerk will be very knowledgeable of product.b. Upscale store clerk will be somewhat knowledgeable of product.c. Discount store clerk is also a “stocker”; has no special knowledge.

d. Warehouse clerk has little or no knowledge. Customers review material on their own.

5. As an enrichment activity, you may wish to have students research their state’s consumer protection laws and present their findings to the class.

Assessment

1. Have students write a list of the problems encountered with warranties based on their class exercises. Ask them to write a response to the following: How does a good consumer show responsibility in resolving these problems?

2. Have students write a letter of inquiry or a letter of complaint about a product.

▼ BACKGROUND

Now that caveat emptor (let the buyerbeware) is no longer the motto of the marketplace, and an increased interest in consumer protection has taken the form ofmore government regulation, producers havegreater responsibility for their products.Written warranties are offered on many items.It is, therefore, useful to know how to readand understand these warranties so that consumers can protect themselves if a productis defective.

▼ MATERIALS

Copies of warranties for different types ofmerchandise and services; pictures of products

▼ OBJECTIVES

After completing this activity, students will beable to• Define and differentiate among full, limited,

implied, and extended warranties.• Alert consumers (the students) to their

responsibilities concerning warranties.

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C ONSUMER RIGHTS AND RESPONSIBILITIES

Name Date Class

RUBRICSa writing (list, letter,etc.), oral presenta-tion, research, groupwork

6

Performance Assessment Activity 6

13. Which of the following is not a consumer right?

a. the right to safe products b. the right to be informedc. the right to a fair price d. the right to choose

14. Some consumers prefer generic products over brand-name products because

a. they are less expensive. b. their quality is better.c. they are more widely available. d. they come with warranties.

15. A company that engages in false advertising can be investigated by the

a. U.S. Office of Consumer Affairs. b. Federal Trade Commission.c. Food and Drug Administration. d. Consumer Product Safety Commission.

CRITICAL THINKING QUESTIONS

Directions: Answer each of the following sets of questions on a separate sheet of paper.

16. Finding the Main Idea What kind of obligations do consumers have?

17. Understanding Cause and Effect What can consumers do if they have problems with a product or serv-ice they purchase?

APPLYING SKILLS

Using Charts and Tables: Study the following table and answer the questions below.

Products Recalled by the Consumer Product Safety Commission in November 1999

18. Why did the CPSC ask Montgomery Ward to recall 780 hooded jackets and sweatshirts?

19. How do you think the CPSC made the decision to have the products recalled?

20. Based on the table, what do you think the purpose of the CPSC is?

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Name Date Class

3, B

Company Product Reason for recall

Perfecto Manufacturing, Inc., 23,400 Sharp edges on lights could cut the insulation on the wiring.SHOlights If wires become exposed, chance of shocks or electrocution.aquarium lights Risk of fire and overheating.

Fluke Corp. 58,000 model T-2 Corrosion of batteries in the tester could cause the devicehand-held voltage and to lose power. Risk of shock, electrocution, and thermalcontinuity testers burns if no power.

Montgomery Ward 780 boys hooded Hood drawstrings can cause entanglement and strangulation.jackets and sweatshirts

Chapter 3 Test Form B

Y OUR ROLE AS A CONSUMER

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RECALLING FACTS AND IDEAS

Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.

11. The money people have left over after they have paid their taxes is called

a. disposable income. b. discretionary income.c. taxable income. d. personal income.

12. “Bait and switch” is an example of

a. informative advertising. b. competitive advertising.c. generic advertising. d. deceptive advertising.

SCORE

3, B

A1. consumer

2. bait and switch

3. warranty

4. informative advertising

5. discretionary income

6. ethical behavior

7. consumerism

8. rational choice

9. comparison shopping

10. generic brand

USING KEY TERMS

Matching: Match each item in Column A with the items in Column B. Write the correctletters in the blanks.

Ba. money a person has left to spend on extras after necessities

have been bought

b. general name for a product rather than a specific brand namegiven by the manufacturer

c. movement to educate buyers about the purchases they makeand to demand better and safer products from manufacturers

d. deceptive advertising practice that attracts consumers with alow-priced product, then tries to sell them a higher-pricedproduct

e. choosing the alternative that has the greatest value amongproducts with comparable quality

f. getting information on the types and prices of products avail-able from different stores and companies

g. promise made by a manufacturer or seller to repair or replacea product within a certain time period if it is found to befaulty

h. person or group that buys or uses goods and services to satisfy personal needs and wants

i. acting in accordance with convictions about right and wrong

j. advertising that benefits consumers by giving informationabout a product

14. Generic products are those that

a. are more expensive than other brands. b. have no brand name at all.c. are only sold in warehouse stores. d. are backed by major companies.

15. “Bait and switch” is an example of

a. informative advertising. b. deceptive advertising.c. competitive advertising. d. generic advertising.

CRITICAL THINKING QUESTIONS

Directions: Answer each of the following sets of questions on a separate sheet of paper.

16. Drawing Inferences and Conclusions Which kind of consumers do you think are most likely to usegeneric products? Why?

17. Determining Relevance What resources are available to help consumers make purchasing decisions?

APPLYING SKILLS

Using Charts and Tables: Study the following table and answer the questions below.

Products Recalled by the Consumer Product Safety Commission in November 1999

18. What was the reason all three products were recalled by the CPSC?

19. How do you think the CPSC made the decision to recall these products?

20. Why did the CPSC ask Fluke to recall its electrical voltage and continuity testers?

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Name Date Class

3, A

Company Product Reason for recall

Perfecto Manufacturing, Inc., 23,400 Sharp edges on lights could cut the insulation on the wiring.SHOlights If wires become exposed, chance of shocks or electrocution.aquarium lights Risk of fire and overheating.

Fluke Corp. 58,000 model T-2 Corrosion of batteries in the tester could cause the devicehand-held voltage and to lose power. Risk of shock, electrocution, and thermalcontinuity testers burns if no power.

Montgomery Ward 780 boys hooded Hood drawstrings can cause entanglement and strangulation.jackets and sweatshirts

Chapter 3 Test Form A

Y OUR ROLE AS A CONSUMER

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RECALLING FACTS AND IDEAS

Multiple Choice: In the blank at the left, write the letter of the choice that best completesthe statement or answers the question.

11. A promise to repair or replace a faulty product within a certain time is

a. product liability. b. required by state law.c. a warranty. d. a example of bait and switch.

12. Every purchase decision involves the use of two scarce resources

a. income and expenses. b. energy and time.c. budgets and capital. d. price and income.

13. All of the following are consumer rights except the

a. right to be informed. b. right to be heard.c. right to redress. d. right to receive a warranty.

SCORE

3, A

A1. competitive advertising

2. ethical behavior

3. bait and switch

4. consumer

5. informative advertising

6. generic brand


8. brand name

9. consumerism

10. warranty

USING KEY TERMS

Matching: Match each item in Column A with the items in Column B. Write the correctletters in the blanks.

Ba. movement to educate buyers about the purchases they make

and to demand better and safer products from manufacturers

b. promise made by a manufacturer or seller to repair or replacea product within a certain period of time if it is defective

c. word, picture, or logo on a product that helps consumers dis-tinguish it from similar products

d. acting in accordance with convictions about right and wrong

e. general name for a product rather than a specific brand namegiven by the manufacturer

f. advertising that gives information about a product

g. advertising that attempts to persuade consumers that a product is different from and superior to any other

h. deceptive advertising practice that attracts consumers with alow-priced product, then tries to sell them a higher-pricedproduct

i. person or group that buys or uses goods and services to satisfy personal needs and wants

j. getting information on the types of product available fromdifferent stores and companies

58B

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■

Resource ManagerCHAPTER 3

You and your students can visit ett.glencoe.com—the Web site companion to Economics Today andTomorrow. This innovative integration of electronic andprint media offers your students a wealth of opportuni-ties. The student text directs students to the Web site forthe following options:

• Chapter Overviews • Student Web Activities

• Self-Check Quizzes • Textbook Updates

Answers are provided for you in the Web ActivityLesson Plan. Additional Web resources and InteractivePuzzles are also available.

Use the Glencoe Web site for additional resources. All essential content is covered in the Student Edition.

ECONOMICS

Application and Enrichment

OUR ROLE AS A CONSUMER

MAKING PURCHASES

Directions: Suppose that you are planning to purchase an expensive product, such as a stereo system. Firstdecide what type of product you will “purchase.” Then, do some research on the product, compare adver-tisements for competing brands, and select the advertisement that most appeals to you. Photocopy the ador cut it out of a newspaper or magazine. If you find the ad on the Web, print a copy. Then make a final“purchasing” decision. Finally, use the information you have gathered and the ad to answer the followingquestions.

1. What specific product did you “purchase”? (brand and type)

2. What information does the ad you chose contain?

3. Which statements in the ad made the greatest impact on your buying decision?

4. How can you check the accuracy of the information you found in your research or in the ad?

5. How was the ad constructed to make the strongest impact on consumers?

6. What other factors, such as the warranty, price, reputation, influenced your choice of this particular brand?

7. What consumer resources did you use to help make your buying decision? Which one of these resources was themost helpful and in what ways?

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Enrichment Activity 3

Teaching Transparency

Application and Enrichment

Review and Reinforcement

C HAPTER 3 YOUR ROLE AS A CONSUMERDirections: Read each vocabulary clue on the left, then write the letter of the matching term in the blankspace. You should have two terms left over.

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1. Any person or group that buys or uses goodsand services

2. Consumer decisions based on opportunity cost

3. Movement to educate buyers about their purchases

4. Money left over to spend on extras after purchasing necessities

5. Money remaining after paying all taxes

6. Misleading advertising practice

7. Advertising that benefits consumers

8. Getting information on types and prices ofavailable products

9. General name for a product

10. Promise made by manufacturer or seller toreplace a faulty product

a. consumerism

b. disposable income

c. consumer

d. rational choice

e. informative advertising

f. generic brand

g. bait and switch

h. warranty

i. brand name

j. discretionary income

k. comparison shopping

l. ethical behavior

Write the remaining terms from chapter 3. Define andgive an example for each.

m.

n.

Economic VocabularyActivity 3

58A

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D ISTINGUISHING FACT FROM OPINIONDistinguishing fact from opinion can help you make informed judgments about what otherssay and write. To do so, first identify the facts. Check the sources of the facts to make sure thatthey are reliable. Then identify opinions by looking for statements of feelings or beliefs.

Directions: Read the newspaper article excerpt below and answer the questions that follow.

President Clinton vetoed the Republicans’ $792 billion tax cut bill yesterday, killing the chances for a major tax reduc-tion this year. . . . The long-promised veto of the measure. . . underscored the deep divisions among politicians aboutwhat to do with the country’s soaring budget surpluses. . . .

Clinton. . . said the GOP tax cut bill would steer too much relief to the wealthy and leave too little money for impor-tant programs. “The bill is too big, too bloated [and] places too great a burden on America’s economy,” the presidentsaid.

Republicans fired back, . . . “It is a good bill, and I regret the president has stolen this tax cut from working Americanfamilies.”

House and Senate tax writers are eager to extend a number of popular expiring tax provisions, including a work-opportunity credit and a research and development credit, important to the high-tech industry. There also issubstantial support on Capitol Hill for restoring funding for teaching hospitals, nursing homes, home health agenciesand other activities cut from Medicare in 1997, for increasing the availability of affordable health care, and for raisingthe minimum wage.

1. Using a highlighter marker, highlight all the statements in the passage that you think are factual statements.

2. Using a pencil or pen, underline all the statements that you think are opinions.

3. How did you recognize the opinion statements?

Name Date Class

18

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C ATEGORIZING INFORMATION ABOUT BUSINESSORGANIZATIONS

33

Categorizing helps you deal with many facts in an organized way. For example, the advantagesand disadvantages of business organizations can be studied by organizing facts in a chart.

Directions: Categorize the information about two types of business organizations by writing the numberof each phrase below in the correct space or spaces.

Business Organization Advantage Disadvantage

Sole Proprietership

Partnership

1. usually limited capital

2. ease of starting up

3. ease of management

4. only one special IRS schedule required at tax time

5. establishment involves only fees for attorney andstate

6. potential for conflict

7. enjoyment of profits without having to share them

8. no separate business income tax preparation

9. more easily attracts top talent

10. satisfaction of being your own boss

11. ease of getting out of business

12. attracts financial capital more easily

13. personal and full responsibility for all business lossesand debts

14. difficulty raising financial capital

15. each responsible for acts of all other partners

16. often limited managerial experience

17. difficult attracting qualified employees

18. limited life

19. more efficient operations because of larger size

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Y OUR ROLE AS A CONSUMERWhen you purchase a good or service, you should consider several factors. Among them are thesize of your income, the quality of the item, whether you should buy the item new or used,what sort of warranty is provided, and how friends and consumer magazines evaluate the item.

Directions: Mai is thinking of buying a pair of in-line skates. Use the information that follows to evaluatethe choices that she must make. Then answer the questions.

The table below summarizes Mai’s weekly income after taxes. From this income, she has to buy her school lunch,which averages $10 per week. She also uses her income to buy other things she wants, such as CDs, cosmetics, andmovie tickets.

Allowance $15

Part-time job in drugstore $30

Occasional babysitting jobs $15 (average)

1. What is Mai’s disposable weekly income?

2. What is her discretionary weekly income?

Mai sees one pair of skates in a sporting goods store and another in a discount store. Mai’s friend Ginny is selling apair of outgrown skates in Mai’s size. The table below compares these skates.

Sporting-goods store $85 excellent 2 years excellent

Discount store $29 poor 6 months poor

Friend $20 very good none very good

3. Evaluate the advantages and disadvantages of each pair of skates.

4. Think of at least two kinds of additional information and factors Mai might consider before making her decision.

33

Source of Income Amount

Quality of Materials Evaluation inSkates Price and Workmanship Warranty Consumer Magazine

Critical Thinking Activity 3 Reteaching Activity 3

Reinforcing Economic Skills 18

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F ILING A CONSUMER COMPLAINTAll families receive some kind of unsolicited, or “junk” mail. This mail might be unorderedcatalogues, sample products, or unbelievable “sweepstakes” announcements. The U.S. PostalService can help you to rid your home of these nuisances.

Directions: Complete the following letter of complaint to the Postal Service, describing one kind of junkmail that your family wishes it didn’t receive.

1. Write the date.

2. Fill in your address.

3. Describe the type of mail.

4. Supply an appropriate adjective.

(1)

(2)

Consumer AdvocateU.S. Postal Service475 L’Enfant Plaza SWWashington, D.C. 20260

Dear Consumer Advocate:

As a whole, the postal service is commendable. Unfortunately, my family and I find repeated mailings of

(3) annoying.

Enclosed are samples of the offending mail. I’m sure you’ll agree that they are (4) . Perhaps you can

take some action, such as (5) , to stem the flood.

I am looking forward to your reply and thoughts on my suggestion. Please contact me at the above address or call me

at (6) .

Sincerely,

(7)

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5. Suggest a way to curb the offending mail withoutviolating constitutional rights.

6. Write your phone number.

7. Sign your name.

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N EEDS, WANTS, MARKETERSWhen shopping for food and clothing, customers look for the best quality at the lowest price.Store owners are trying to make a good profit by selling more articles or getting higher pricesfor the articles. Strategies to encourage shoppers to buy more include sales, special promo-tions, and displays.

Directions: Explain (a.) the effect the store owner hopes the strategy described below will have on the customers and (b.) the benefit to the store owner if the strategy succeeds.

1. Kramer’s Supermarket sells two brands of English muffins. The name brand, which costs $1.79 for a package, isdisplayed in a special rack in the middle of the bread aisle. The store brand, which costs $1.29, is placed on thefar end of the bread shelves.

(a.)(b.)

2. At the end of summer, Chen’s Clothing Store had this sale: Buy two short-sleeve shirts at full price, and get athird shirt free.

(a.)(b.)

3. Sally’s Food Warehouse ran this promotion: With receipts for $100 worth of food bought at the store, you canget $10 off your next purchase of $10 or more.

(a.)(b.)

4. The Upper Crust Dress Shop is the only retail outlet for the new fashions by Vivette, a popular French dressdesigner. In newspaper and television advertisements, the shop announced that on Saturday afternoon Vivettewould be giving advice in person on what to wear in the coming season.

(a.)(b.)

5. In Rolf’s Men’s Store, the clothes are displayed as ensembles. Shirts are matched with ties, sport jackets withsweaters, and suits with overcoats.

(a.)(b.)

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Economic Forms 12

1212

Producer Price Indexes by Major Commodities(1982 � 100)

Commodities

Farm Products

Processed Foodsand Feeds

Apparel

Gasoline

Drugs andPharmaceuticals

Tires

Lumber

Pulp, Paper,and AlliedProducts

Machinery andEquipment

HouseholdFurniture

TransportationEquipment

Passenger Cars

1990

112.2

121.9

117.5

78.7

170.8

96.2

124.6

141.2

123.7

125.1

121.5

118.3

1991

105.7

121.9

119.6

69.9

182.6

97.4

124.9

142.9

127.8

128.0

126.4

124.1

1992

103.6

122.1

122.2

68.1

192.2

98.4

144.7

145.2

129.9

130.0

130.4

126.9

1993

107.1

124.0

123.2

63.9

200.9

98.3

183.4

147.3

132.2

133.4

133.7

129.8

1994

106.3

125.5

123.5

61.7

206.0

97.8

188.4

152.5

134.8

138.0

137.2

133.9

1995

107.4

127.0

124.2

63.7

210.9

99.0

173.4

172.2

139.1

141.8

139.7

134.1

1996

122.4

133.3

125.1

72.8

214.7

95.4

179.8

168.7

142.5

144.5

141.7

135.4

1997

112.9

134.0

125.7

71.9

219.1

93.6

194.5

167.9

145.0

146.2

141.6

133.6

1998

104.6

131.0

126.7

53.4

242.6

92.2

179.5

171.7

147.2

148.4

141.2

131.9

Source: U.S. Department of Labor, Bureau of Labor Statistics, Producer Price Indexes, http://stats.bls.gov/

C OMMODITIES INDEXES

Economic Concepts Transparency 12

Consumer ApplicationsActivity 3

Free Enterprise Activity 5

H ANDLING A CHECKING ACCOUNT

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Congratulations! You finally have a checking account. You are careful to record every checkand deposit accurately. Sometimes you even double-check your math with a calculator.Keeping your checkbook straight is not a problem. When the bank statement comes, though,you are confused.

Take a little time to sort it out. Begin by just reading the statement. It will list your starting balance, your currentbalance as of the statement date, the checks you wrote, the deposits you made, and any service charges. After youhave put the canceled checks and deposit slips in order and checked them off in your checkbook, you can start theprocess of balancing your checkbook. The purpose of balancing your checkbook is to find out if your records for yourmoney match the bank’s records.

A method for balancing your checkbook is outlined below. Use these figures to try it out. Your checkbook regis-ter shows a balance of $310.59. You have one outstanding deposit of $231 and three outstanding checks for thefollowing amounts: $14.57, $127.00, and $8.11. Looking at your bank statement, you see that the bank lists yourcurrent balance as $318.62. In addition, a number of service charges are detailed in the statement:

(1) Check fee: 27 checks at $.20 each

(2) Base charge of $4 for going below the minimum balance

(3) Overdraft fee of $15 for writing a check for $150 when your balance was down to $95

(4) Check order for new checks at $24.95

You also note that the statement shows that you used the ATM to withdraw $40. You remember that you were insuch a hurry that day you did not record and deduct this amount in your checkbook.

Directions: Now that you have compared your register and the bank statement, follow these steps to balance your checkbook:

(1) Total all your service charges and the ATM withdrawal.

(2) Total all your outstanding checks.

(3) Write down the current balance as shown on the statement.

(4) Add all outstanding deposits to the current balance. �

�

(5) Subtract the total service charges and ATM �

withdrawal (step 1). �

(6) Subtract all outstanding checks (step 2). �

(7) Compare the result with the balance written in

your checkbook:

Do the two match?

What do you do if the two balances do not match? Check your math, both in your check register and in yourcalculations above. Make sure that you have recorded each check and deposit correctly.

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EXAMINING THE CARTOON

Multiple Choice

1. What does the “rolls a little rough” statement about a rock that is obviously flat on the bottom imply about thissalesperson’s attitude toward consumers?

a. They really need this product. b. They are very gullible.c. They need encouragement to make the decision. d. They can’t afford anything better.

2. What message does the “prehistoric” setting of the cartoon convey?

a. Consumers have always been victimized. b. Transportation has always been a need.c. People have always bought and sold things. d. Civilization has made great advances.

Critical Thinking

3. Analyzing the Cartoon How do the hanging flags enhance the point of the cartoon?

4. Expressing Your Opinion Do you think this cartoon qualifies as an editorial, or is it only intended to makepeople laugh? Explain.

L ET THE BUYER BEWAREThe Latin phrase caveat emptor means “let the buyer beware” or “buy at your own risk.”Consumers are wise to keep it as their motto. After all, those who market goods are working intheir self-interest to sell them. The relationship between selfish business interests and victim-ized consumers is a favorite topic of cartoonists.

Directions: Study the cartoon below. Then answer the questions that follow.

77

THE FAR SIDE c 1987 FARWORKS, INC. Used by permission. All rights reserved.

country. There are two consumer segments in the UnitedStates today, traditionally viewed as niche segments,which are now sufficiently large that they are impactingretailing as a whole. Actually distorting the overall realityof the shopping picture. In fact, creating a new reality.

Mature consumers, those 55 and older, and ethnicconsumers . . . are now sufficiently large and influentialthat they are driving the growth and decline of many retailoutlets and product categories. . . .

So what do we do about all this? . . . What does ittake to build loyalty in this environment? . . .

Today, the loyalty connection is no longer personal. It is based on practicality, efficiency and expediency.Consumers will continue to shop an outlet or a brand aslong as it continues to satisfy their needs for productselection, conveniently available at a fair price.

That’s part problem, part opportunity. For conve-nience and familiarity in the end are not enough. They are

easily diminished by one long check-out line or one out-of-stock too many.

As a result, the consumer who has access to many othergenerally acceptable outlets carrying the same merchandiseat the same price will merely turn right at the traffic lightinstead of left and shop elsewhere. Or stay home and pickup the phone or go on-line and order direct. . . .

That means a breadth and depth of merchandise thatsatisfies your target customers’ needs. And since the one-size-fits-all approach no longer works in a highlysegmented society where ethnicity and age are impactingshopping preferences, this means a more complete selec-tion than most retailers carry today.

Liebmann, Wendy. “How America Shops.”Vital Speeches of the Day, July 15, 1998, Vol. LXIV No.19, pp. 595-598.

6 Primary and Secondary Source Readings

ANALYZING THE READING

1. What is the first paradox (statement that seems to contradict common sense) cited in the article about shopperstoday?

2. Why are tastes and preferences as important as price in determining consumer choices today?

3. What two dimensions of consumers are creating the appearance of paradox?

4. Why does the marketer suggest that retailers carry a more complete selection of merchandise than they have car-ried in the past?

5. Do you think the speaker believes that the existence of a $10.95 watch will affect demand for a $525 watch?How does the reading modify the explanation of substitutes in chapter 3 of your text? (Is margarine always asubstitute for butter?)

Copyright ©

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Cooperative Learning Simulations and Problems 9

Primary and Secondary Source Reading 3

Math Practice for Economics Activity 9

Economic Cartoons Activity 7

1. Group Work Stage 1: Students work in groups ofsix or more. Review the information in your text-book on your role as a consumer. Choose a productthat your group will use to demonstrate smart con-sumer habits. Assign group members to researcheither consumer issues or advertising issues.

2. Individual Work Stage 2: Students work as individuals. Research your assigned set of issues.Consumer: Develop a set of guidelines for teenagersto use when making purchasing decisions. Addressany of the issues listed above and add any othersyou believe to be helpful. Advertising: Create a setof guidelines dealing with advertising. Address theissues listed above and add any others you believeto be helpful.

3. Paired Work Stage 3: Students work in pairs.Using the information gathered in Stage 2, take the

group’s chosen product and write an outline of thedecision-making steps a wise consumer would follow in purchasing this item.

4. Group Work/Analysis Stage 4: Students return tooriginal groups. Choosing the best points from eachoutline, compile a group outline of the decision-making process. Finally, create a poster with a flowchart that illustrates a wise consumer’s decision-making process and present it to the class.

Group Process QuestionsWere the goals of the assignment clear?

Did each member contribute ideas at group meetings?

Did members work well together?

What would you do to improve the group work?

COOPERATIVE GROUP PROCESS:

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B EING A GOOD CONSUMER

GROUP PROJECT

A consumer is anyone who buys or uses goods or services to satisfy needs and wants.Consumers must be well-informed and aware of their choices in order to make wise purchasing decisions. In the following activity, your group will develop a poster presentationthat offers practical advice for making responsible choices in the marketplace.

▼MATERIALS:

Posterboards, art materials

Consumer Issues Advertising Issues

• Needs vs. wants • Emotional impact• Trade-offs • Factual information• Quality • Needs and wants• Sales (price reductions) • Operating costs• Buy new or used • Price of similar products

Name Date Class

9

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■


ince 1989, we at WSL Strategic Retail have conductedHow America Shops, our national research study in whichwe talk to American consumers about their behavior andattitudes toward shopping.

In the recently published 6th edition, entitled “TheConsumer Paradox: The Threat to Loyalty in the NewMillenium,” it has become very clear what’s actually goingon, and what manufacturers and retailers must do to besuccessful and profitable long-term. So, how doesAmerica shop?

Well first, the paradoxes: Paradox 1: Consumers are shopping more often, at

more outlets—when they say they have no time. . . . They made an average of 3.5 shopping trips per

week, up from 3.2 in 1995. In fact, 36% made 4 or moretrips per week—up from 30% in 1995. . . .

All this at a time when consumers say they have notime. And yet, they are shopping at more outlets moreoften. A paradox indeed. . . .

Paradox 2: They are shopping more but buyingless. . . .

. . . They are spending their money on what they con-sider “essentials”: food, personal care products, clothing,prescription drugs . . . even greeting cards.

They are buying less of what they consider non-essentials: cosmetics, fragrance, fashion accessories(be glad you are not in that business!), collectibles, homedecorating. Categories that appear to have no inherentvalue to consumers, no point of differentiation, no news.

Paradox 3: “Selection” is now the driver—what theheck happened to low prices. . . .

But look at what consumers mean by selection:always in stock, have what I want, unique merchandise,good selection, high quality merchandise. . . .

But what about convenience? What about price? Thetruth is consumers want it all. Selection, convenience,price all rated high . . . very high in this year’s study. . . .

So what’s going on here? The truth is, consumerstoday are not paradoxical at all. There are, in fact, twodimensions that are creating the appearance of paradox.

When consumers define themselves

as sale shoppers they are, in fact,

saying they are value shoppers.

They know when a product or

service or store is worth the time

they use,

The first is that consumers clearly and unabashedlydefine themselves in terms of their ability to get the bestvalue out of every shopping experience.

They have reassessed and continue to reassess eachcategory they buy and each outlet they shop to determinewhether or not it is worth it. . . .

When consumers define themselves as sale shoppersthey are, in fact, saying they are value shoppers. Theyknow when a product or service or store is worth the timethey use, the money they spend. And they know when itisn’t. That’s part of the answer to the ConsumerParadox. . . .

The second dimension creating the appearance of a paradox is the changing demographic diversity of this

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Primary and Secondary Source Readings 5

Name Date Class

H OW AMERICA SHOPSAlong with population and income changes, consumer tastes and preferences are determinantsof demand. The marketing department of every business pays particular attention to consumertastes and preferences. In fact, marketing is interested in all aspects of consumer behavior,including how people shop. Any major shift in shopping behavior is significant to a businessthat wants to make its particular product a sales leader. The article below is an address inwhich Wendy Liebmann, president of WSL Strategic Retail, explains recent changes in shop-ping behavior. As you read, consider how these changes may affect a retailer. Then answer thequestions that follow.

3

S

http://ett.glencoe.com

Block Schedule

Greg ParsleyRoncalli High SchoolIndianapolis, Indiana

Mission: Smart ShoppingHave students read aloud the information listed in

Figure 3.4 on page 63 (Checklist for Consumer DecisionMaking) and Figure 3.7 on page 68 (Checklist forAnalyzing Ads). Students are then required to make onepurchase based upon the information presented in thesecharts and the rest of Chapter 3. Students must give an in-class presentation with their purchased product in hand.They must explain the reasoning behind the purchase,including advertising, cost, appeal, and so on.

ACTIVITYFrom the Classroom ofACTIVITYFrom the Classroom of

Activities that are particularly suited to use within the blockscheduling framework are identified throughout this chapterby the following designation: BLOCK SCHEDULING

Block Schedule

Use Glencoe’s Presentation Plus!,a Microsoft PowerPoint® application, to teach Your Role as a Consumer.With this multimedia teacher tool, you

can customize ready-made presentations. At your fingertipsare interactive transparencies, on-screen lecture notes,audiovisual presentations, and links to the Internet and toother Glencoe multimedia.

Interactive Lesson PlannerPlanning has never been easier! Organize your week, month, semester, or year with all the lesson helps you need to make teaching

creative, timely, and relevant—the way it is meant to be.The Interactive Lesson Planner opens Glencoe’s Chapter 3resources, helps you build your schedule, and tracks yourprogress.

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■


Teaching strategies have been coded for varying learning styles and abilities.L1 BASIC activities for all studentsL2 AVERAGE activities for average to above-average

studentsL3 CHALLENGING activities for above-average students

ENGLISH LANGUAGE LEARNER activitiesELL

Key to Ability Levels

Voluntary Standards Emphasized in Chapter 3Content Standard 1 Students will understand that pro-ductive resources are limited. Therefore, people cannot haveall the goods and services they want; as a result, they mustchoose some things and give up others.

Content Standard 2 Students will understand that effec-tive decision making requires comparing the additionalcosts of alternatives with the additional benefits. Mostchoices involve doing a little more or a little less of some-thing; few choices are all-or-nothing decisions.

Resources Available from NCEE• Capstone: The Nation’s High School Economics Course• Civics and Government: Focus on Economics• Personal Finance Economics: Wallet Wisdom• Personal Decision Making: Focus on Economics

To order these materials, or to contact your StateCouncil on Economic Education about workshops andprograms, call 1-800-338-1192 or visit the NCEE Web siteat http://www.nationalcouncil.org

Easy Planning and Preparation!

58D

■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■


58C

Blackline Master

Transparency

Software

CD-ROMVideodisc

Audiocassette

Videocassette

Reading Objectives Reproducible Resources Technology/Multimedia Resources

Section 1Consumption, Income, and DecisionMaking• What is the difference between

disposable and discretionary income?• What three considerations should

govern your decision making as a consumer?

Section 2Buying Principles or Strategies• What trade-offs occur when you are

gathering information?• What forms of advertising exist?• How can you learn to practice

comparison shopping?

Section 3Consumerism• What are your rights as a consumer?• What private and federal help can you

receive as a consumer?• What are your responsibilities as a

consumer?

Reproducible Lesson Plan 3-1Daily Lecture Notes 3-1Guided Reading Activity 3-1Reading Essentials and Study Guide 3-1Daily Focus Activity 27Section Quiz 3-1*Reinforcing Economic Skills 18

Reproducible Lesson Plan 3-2Daily Lecture Notes 3-2Guided Reading Activity 3-2Reading Essentials and Study Guide 3-2Daily Focus Activity 28Section Quiz 3-2*

Reproducible Lesson Plan 3-3Daily Lecture Notes 3-3Guided Reading Activity 3-3Reading Essentials and Study Guide 3-3Daily Focus Activity 29Section Quiz 3-3*

Daily Focus Transparency 27Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger Videoquiz

NBR's Economics & You*Presentation Plus!


Daily Focus Transparency 28Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger VideoquizPresentation Plus!


Daily Focus Transparency 29Vocabulary PuzzleMakerInteractive Tutor Self-Assessment SoftwareMindJogger VideoquizPresentation Plus!


*Also available in Spanish

Section Resources

59

59Your Role as a Consumer

Terms to Know• consumer• disposable income• discretionary income• rational choice

Reading Objectives1. What is the difference

between disposable anddiscretionary income?

2. What three considerationsshould govern your decision making as aconsumer?

READER’S GUIDE

You and everyone around you are consumers and, as such,play an important role in the economic system. A consumeris any person or group that buys or uses goods and ser-

vices to satisfy personal needs and wants. Consumers buy a widevariety of things—food, clothing, automobiles, movie tickets, and,as noted in the Cover Story above, even insurance against alienabductions. In this section you’ll learn how to spend—or notspend—your income wisely.

1

KIPLINGER’S PERSONAL FINANCE MAGAZINE, OCTOBER 1998

Worried about being kidnapped by aliens? We didn’treally think so. But fears of alien abduction plague enoughpeople that at least one insurance company offers a policy

that will pay if little green men come totake you away. You can also buy

coverage against being injuredby a ghost, eaten (as opposedto abducted) by an alien, or hitby an asteroid (hey, it couldhappen).

Who buys this stuff?“Normally, they’re feeble-

minded,” explains Simon Burgess,who is managing director of the London insurance

brokerage that has tapped the Twilight Zone market.

consumer: any person or groupthat buys or uses goods and ser-vices to satisfy personal needsand wants

CHAPTER 3SECTION 1, Pages 59–64


Reproducible MastersReproducible Lesson Plan 3–1Reading Essentials and Study Guide 3–1Guided Reading Activity 3–1Section Quiz 3–1Daily Focus Activity 27Daily Lecture Notes 3–1

MultimediaDaily Focus Transparency 27Vocabulary PuzzleMakerInteractive Tutor Self-Assessment Software

ExamView® Pro TestmakerMindJogger Videoquiz

NBR’s Economics & YouPresentation Plus!

SECTION 1 RESOURCE MANAGER

OverviewSection 1 explains the difference

between disposable and discre-tionary income and describes fiveconsiderations in consumer deci-sion making.

Answers to the Reading Objectivesquestions are on page 64.

Preteaching VocabularyInstruct students to locate defi-

nitions of the Terms to Know inthe Glossary. Then ask students to use each term correctly in asentence.

Vocabulary PuzzleMaker

READER’S GUIDE

Chapter Overview Visit the Economics Today and Tomorrow Web site at ett.glencoe.com and click on Chapter 3—Chapter Overviewsto preview chapter information.

Why It’s ImportantIf you are thinking about buyinga computer, should you visit everycomputer store in the area? What should you do if your purchase is defective? This chapter will help youlearn to make rational consumer choices.

To learn moreabout con-sumer choices,view the

Economics & You Chapter 9video lesson: Your Role as aConsumer

IntroducingCHAPTER3

58

Chapter OverviewChapter 3 explains the differ-

ence between disposable and dis-cretionary income and examineshow each is spent. Chapter 3 alsoexplores the role of advertising andreviews the rights and responsibili-ties of consumers.

CHAPTER LAUNCH ACTIVITY

IntroducingCHAPTER3

Use MindJoggerVideoquiz VHS to previewChapter 3 content.

Introduce students to chaptercontent and key terms by havingthem access Chapter 3—ChapterOverviews at ett.glencoe.com

Ask students to identify a product they have recently purchased. Then ask them towrite answers to the following questions: Before making your purchase, what questionsdid you ask yourself and others, and what information did you look for? Why did youbuy this particular item and not another? Do you think you acted wisely in making yourpurchase? Why or why not? Call on volunteers to share their responses with the class.Then point out that by asking questions and seeking information before making pur-chases, students are developing buying strategies that will help them act wisely as consumers.

ECONOMICS & YOU

Your Role as a Consumer

!7~$1" Chapter 9 Disc 1, Side 1

ASK: What is a consumer? Aconsumer is a person who pur-chases goods and services.

Also available in VHS.

Project Daily FocusTransparency 27 and have students answer the questions.

This activity is also availableas a blackline master.

Daily Focus Transparencies

C ONSUMER INCOME

1. What percentage of income did American consumers spend ontaxes? How can you tell?

2. Does the graph represent the spending of a “typical” consumer?Explain your answer.

2727

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GrossIncome

DisposableIncome 82%

DiscretionaryIncome 42%

American Consumer Income

100%

BELLRINGERMotivational Activity

Daily Focus Transparency 27


61

How much a person has to spend can also be influenced byinheriting money or property.

Regardless of the size of a person’s income, spendingthat income requires constant decision making. As a con-sumer, each person has a series of choices to make.

Decision Makingas a Consumer

The first decision a consumer must make iswhether to buy an item or not. This may soundso basic as to be unnecessary to mention, buthow many times do you actually think aboutthe reasons for the purchase you are aboutto make? Do you think about whetheryou really need the item? Do you con-sider the trade-offs involved?


Amount ofEducation FemalesMales

Median Income for

Not a High School Graduate

High School Graduate

Some College

Bachelor’s Degree

Advanced Degree

$19,575

$28,307

$32,641

$50,056

$78,032

$10,725

$16,906

$19,856

$30,119

$42,744

How Education Affects Income

Source: Bureau of the Census

Earning Power Thenumber of years you areeducated has a direct effecton your income. How muchcan you expect to makeper year if you do notgraduate from highschool? If you graduatefrom college with a bach-elor’s degree?

For an online update of this graph, visit ett.glencoe.com and click on Textbook Updates—Chapter 3.

3.23.2

Discretionary Income The consumer’s wants serve as aguide in spending income. Some people have more disposableand discretionary income and can therefore spend more thanothers on entertainment. What is discretionary income?

FIGURE 3.3FIGURE 3.3





disposable income: incomeremaining for a person to spendor save after all taxes have beenpaid

discretionary income: moneyincome a person has left tospend on extras after necessitieshave been bought

Disposable and Discretionary Income

A person’s role as a consumer depends on his or her ability toconsume. This ability to consume, in turn, depends on availableincome and how much of it a person chooses to spend now orsave for future spending. Figure 3.1 shows how typicalAmerican consumers spend their money income.

Income can be both disposable and discretionary. Disposableincome is the money income a person has left after all taxes havebeen paid. People spend their disposable income on many kindsof goods and services. First, they buy the necessities: food, cloth-ing, and housing. Any leftover income, which can be saved orspent on extras such as luxury items or entertainment, is calleddiscretionary income. See Figure 3.2.

Education, occupation, experience, and health can all makedifferences in a person’s earning power and thus in his or herability to consume. Figure 3.3 shows how much more you couldearn with a four-year college degree. Where a person lives canalso influence how much he or she earns. City dwellers tend toearn more than those who live in rural areas. Wages in someregions of the country tend to be higher than in other regions.

Taxes and SocialSecurity 17%

Savings 3%

Entertainment5%

Medical andPersonal Care 7%

Housing andHouseholdOperation

30%

Food 14%

Transportation 19% Clothing 5%Source: Standard & Poor’s

Consumer SpendingThe circle graph shows howAmericans spend theirincome. What are the topthree categories of con-sumer spending?


For an online update of this graph, visit ett.glencoe.com and click on Textbook Updates—Chapter 3.

60 CHAPTER 3

60

Guided PracticeL1 Writing Generalizations Askstudents to consider the followingindividuals:1. a farm laborer with no high

school certificate living in ruralTexas

2. a computer engineer with agraduate degree living in Austin,the state capital of Texas

Have students write a generaliza-tion that compares these individu-als’ discretionary spending.

Review Figure 3.1 with stu-dents. Then refer them to theGlobal Economy feature on page62. Encourage them to create acircle graph for consumer spend-ing in Canada.Answer: Housing and HouseholdOperation, Transportation, Taxesand Social Security

L ECTURE LAUNCHERFor most of the 20th century athletes were not paid the millions of dollars that seem so com-monplace today. In fact, many players took a second job during their off-season so they couldpay their bills. Yankees players Phil Rizzuto and Yogi Berra even opened a men’s clothingstore. Would you be more likely to visit a store owned by a famous celebrity than one ownedby a non-celebrity? Would you be willing to pay 10 percent more for an item in the celebrity’sstore?

I. Disposable and Discretionary Income

A. The ability to consume depends on a person’s available income and how much of it isspent or saved.

B. Disposable income is money left after paying all taxes, whereas discretionary income ismoney left after paying for necessities or money that can be saved or spent on luxuryitems.

C. Education, occupation, experience, health, location, and wages can all influence a per-son’s ability to consume.

D. Spending income requires constant decision making.

• Discussion Question

Create a budget that lists all of your expenses. Which expenses are paid with dispos-able income? discretionary income? (Answers will vary, but students should demonstrate al d di f h diff b di bl d di i i )

3-1

PAGES 60–61

Daily Lecture Notes 3–1

Reading Disability Allow students who have difficulty with reading comprehension toread aloud with a partner. Have readers stop at the end of each page and discuss whatthey have read. Encourage them to note definitions and important facts. The auditory cuesof reading aloud and discussing the material should increase comprehension.

Refer to Inclusion for the Social Studies Classroom Strategies and Activities for students with different learning styles.

Meeting Special Needs

Ask students to identify discre-tionary purchases they have maderecently.Answer: any leftover income afternecessities have been purchased,which can be saved or spent onextras such as luxury items orentertainment

One generalization that can bedrawn from the chart is thatincome increases as level of edu-cation rises. ASK: What isanother generalization you candraw from this chart? Men receivehigher incomes than women at alllevels of education.Answer: Males—$19,575, Females—$10,725; Males—$50,056,Females—$30,119

Name Date Class

For Use with textbook pages 59–64

C ONSUMPTION, INCOME, AND DECISION MAKING

RECALLING THE FACTS

Directions: Use the information in your textbook to answer the questions.

1. What are the characteristics of a consumer?

Disposable and Discretionary Income

2. What are the two types of income?

a. __________________________income

b. __________________________income

3. How are the two types of income different from one another?

4. What factors help determine a person’s potential earning power?

Decision Making as a Consumer

5. What are the three decisions consumers have to make?

a

3-1

Guided Reading Activity 3–1

Organize students into several groups, and ask groups to carefully study Figure 3.4 onpage 63. Then tell groups their task is to prepare a script for a 5- to 10-minute televisiondocumentary titled Consumer Decision Making. Inform groups that their documentarymaterials should include a brief synopsis of the program, a detailed script, and several sto-ryboards illustrating scenes from the program. Call on groups to present their documentarymaterials to the rest of the class. If audiovisual equipment is available, some groups maywish to “shoot” their documentaries. BLOCK SCHEDULING

Cooperative Learning


63

63

Checklist for Consumer Decision Making


Part A. Deciding to Spend Your MoneyBefore you buy anything, you should ask yourself:

1. Do I really require this item? Why? Real needs are few, but wants are unlimited.

2. Is this good or service worth the time I spent earning the income to pay for it?

3. Is there any better use for my income now? Should I save instead for future needs?

Part B. Deciding on the Right PurchaseAfter you have made up your mind to buy a good or service, you are faced with more questions:

1. Do I want high, medium, or low quality? Quality refers to appearance, materials used, and thelength of time a product will last. For a higher price, you can usually get higher quality. For alower price, you can usually expect a product that may not be so attractive or as long lasting.At times, such a purchase may suit your needs very well, however.

2. If I am buying an appliance or a car, do I want one that will be the most efficient to operateeach year? The answer will probably involve a trade-off. A small automobile, for example,may use less gasoline than a larger one, but it provides less protection in an accident.

3. Does this particular item—a Brand Y laptop, for example—require more service than Brands A,B, and C? If so, do I want this additional problem and expense?

4. Should I wait until there is a sale on the item I want? Sales of certain items are seasonal. Forexample, winter clothes are on sale after Christmas and summer clothes in August.

5. If I am looking for an expensive item, should I buy it new or used? What things are better tobuy new than used? How can I protect myself if I buy a used item?

6. Should I choose a product with a well-known brand name even though it costs more than asimilar product without a brand name? Are there any benefits to buying a brand-name product? What are they?

7. Does anyone I know own this product so that I can get a firsthand opinion?

8. Is the warranty on this particular product comparable to warranties on similar items?

9. Is the return or exchange policy of the store where I am thinking of buying a product compa-rable to the policies of other stores selling similar items?

10. What do consumer magazines say about the product?

Part C. Deciding How to Use Your PurchaseOnce you own something—whether it is clothing, a DVD player, or an automobile—you must decide:

1. How much time and effort should I spend personally repairing and maintaining the product?

2. How much should I spend on repairs and maintenance?

3. At what point should I replace this item? Why? (This brings you back to Part A.)



Meeting LessonObjectives

Assign Section 1 Assessment ashomework or an in-class activity.

Use Interactive Tutor Self-Assessment Software to review Section 1.



62 CHAPTER 3

rational choice: choosing thealternative that has the greatestvalue from among comparable-quality products

Making consumer decisions involves three parts, each includingseveral steps. Figure 3.4 can help guide you through the entireprocess. The steps in Part A of Figure 3.4 will help you analyze thefirst consumer decision—whether to buy an item in the first place.

Scarce Resources After you havedecided to make a purchase, at least twoscarce resources are involved—income andtime. Before you spend your moneyincome, you need to invest time in obtain-ing information about the product youwish to buy. Suppose you decide to buy amountain bike. The time spent visitingstores checking models and prices is acost to you. This time cannot be used foranything else.

Opportunity Cost Virtually all of thesteps in consumer decision makinginvolve an opportunity cost. Rememberthat opportunity cost is the value of yourhighest alternative choice that you did notmake. In step 1 of Part B of Figure 3.4,for example, your choice between a low-,medium-, or high-quality product involvesan opportunity cost.

In general, a high-quality product costsmore than a low-quality product. For

example, suppose that you are trying to decide between newcross-training shoes. One model has a pump system that allowsyou to get a closer fit on your ankle. The other model does not.The pump system model costs $80 more than the other model. Ifyou choose the higher-priced pump system shoe, you will sacri-fice $80. The opportunity cost of the pump model over the lesser-quality model shoe is therefore $80, or what you could havebought with that $80. See Figure 3.5 on page 64.

Rational Choice When you make consumer decisions basedon opportunity cost, you are engaging in rational choice.Economists define rational choice as the alternative that has thegreatest perceived value.

Rational choice involves choosing the best-quality item that isthe least expensive from among comparable-quality products. Asa consumer, you will make rational choices when you purchasethe goods and services you believe can best satisfy your wants.

How do our neighbors to the north spend theirmoney? According to Statistics Canada—the Canadianequivalent of the U.S. Bureau of the Census—Canadianconsumers spend each dollar as follows:

• Housing and Household Operation $.24

• Personal Income Taxes .21

• Transportation .12

• Food .11

• Insurance Payments and Pension Contributions .06

• Recreation .06

• Clothing .05

• Health and Personal Care .04

• Other .11

Consumers in Canada

62

IndependentPracticeL2 Applying Ideas Have studentsimagine they are thinking of makinga major purchase—a new stereo sys-tem, perhaps. Ask students to write adescription of the decision-makingprocess for this purchase, using theguidelines set out in Figure 3.4 onpage 63. Encourage students to shareand discuss their descriptions.

ECONOMICS & YOU



ASK: What is the differencebetween disposable incomeand discretionary income?Disposable income is the moneyleft after taxes that is spent onsuch basics as food, clothing,and housing. Discretionaryincome is the money that is leftover for things that are not con-sidered essential, such as CDs orjewelry.

Also available in VHS.

Organize the class into several small groups to conduct a survey on how consumersdecide to make purchases. Have groups create a questionnaire based on the informationin Figure 3.4 on page 63. Next, have groups use their questionnaires to survey con-sumers in their community. Then have groups use their findings to create a report on con-sumer decision-making behavior. Call on groups to present their reports to the class.

BLOCK SCHEDULING

Free Enterprise ActivityGraphic Organizer Copy the following dia-gram on the board:

– =

Have students use upward, downward, or hor-izontal arrows to show what would happen tothe size of the boxes in these situations:a. You receive a pay raise. (Disposable Income↑,

Expenses→, Discretionary Income↑)b. You cut energy expenses. (Disposable

Income→, Expenses↓, Discretionary Income↑)c. Wanting to graduate from college sooner

rather than later, you leave your full-timejob for a lower-paid part-time position.(Disposable Income↓, Expenses→,Discretionary Income↓)

DiscretionaryIncomeExpensesDisposable

Income


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Section Quiz 7

Multiple Choice: In the blank at the left, write the letter of the choice that best com-pletes the statement or answers the question. (10 points each)

6. American consumers spend most of their money on

a. recreation. b. housing and food.c. health and personal care. d. transportation.

7. The first decision a consumer must make is

a. whether or not to buy an item. b. what quality the product should be.c. whether the product has a warranty. d. how to use the product.

8. All the steps in consumer decision making involve

a. disposable income. b. discretionary income.c. luxury items. d. opportunity cost.

9. A rational choice involves choosing

a. most expensive goods. b. least expensive goods, regardless of quality.c. goods that you believe can best d. goods that are highly advertised.

satisfy your wants.

10. Money that is spent on luxury items or entertainment is

a. discretionary income. b. disposable income.c. opportunity cost. d. highest alternative choice.

SCORE

A1. consumer

2. disposable income

3. discretionary income

4. rational choice

5. opportunity cost

Ba. the value of the highest alternative choice that a

person did not make

b. any person or group that buys or uses goods andservices to satisfy personal needs and wants

c. choosing the alternative that has the greatest valueamong comparable quality products

d. money or income a person has left to spend onextras after necessities have been bought

e. income remaining for a person to spend after alltaxes have been paid

Matching: Place a letter from Column B in the blank in Column A. (10 points each)

Name Date Class

3, 1

Section Quiz 3–1

Critical

Thinking Skills

65


Distinguishing fact from opinion can help you make reasonable judgments about what others say andwrite. Facts can be proved by evidence such as records, documents, or historical sources. Opinions arebased on people’s differing values and beliefs.

Critical Thinking Skills

Practicing the Skill

Read the excerpt below, then answer the questions.

“Sony’s Digital Creatures Laboratory [has] introducedwhat is almost certainly the world’s most sophisticatedentertainment robot. Priced at $2,000, it’s called AIBO, aJapanese word for ‘companion’ that’s also short forArtificial Intelligence Robot. And yes, AIBO is a roboticdog. This puppy is not ready to bring you your slippers,but in sheer brain power, he puts your basic Furby toshame.

Sony hopes AIBO is just the first in a whole menagerieof artificial dogs, cats, monkeys, and creatures yet to beimagined. . . . Indeed, AIBO is just smart enough not tofall off the edge of a table. But within a few years, suchcompanions could be running errands, helping withhousehold chores, and assisting the handicapped.”—Business Week, May 24, 1999

1. What are three factual statements in the passage?2. Which statements are opinions? Explain.

Application Activity

Record a television interview. List three facts andthree opinions that were stated.

DistinguishingFact From Opinion

• Read or listen to the infor-mation carefully. Identifythe facts. Ask: Can thesestatements be proved?Where would I find infor-mation to verify them?

• If a statement can beproved, it is factual. Checkthe sources for the facts.Often statistics soundimpressive, but they maycome from an unreliablesource.

• Identify opinions by look-ing for statements of feel-ings or beliefs. Thestatements may containwords like should, would,could, best, greatest, all,every, or always.

Practice and assesskey skills with

Skillbuilder InteractiveWorkbook, Level 2.

Learning the Skill

To learn how to identify facts and opinions, followthe steps listed on the left.

Distinguishing Fact FromOpinion

Help students distinguishbetween facts and opinions byoffering the following examples:1. In 1998 the population of the

United States was about 270million.

2. In the third quarter of 1999,consumer spending increased atan annual rate of 4.3 percent.

3. There are too many people liv-ing in the United States.

4. Consumers waste most of theirmoney.

Point out that 1. and 2. are fac-tual statements—they can be provenby statistics. Statements 3. and 4.,however, cannot be proven.

Have students demonstrate thatthey understand this difference bywriting several facts and opinions.

Glencoe SkillbuilderInteractive Workbook,Level 2

This interactive CD-ROM rein-forces student mastery of essen-tial social studies skills.

Answers to Practicing the Skill

1. The robot is priced at $2,000; it is called AIBO; aibo is a Japanese word for “compan-ion;” AIBO is also short for Artificial Intelligence Robot; AIBO is a robotic dog.

2. almost certainly the world’s most sophisticated entertainment robot; AIBO is justsmart enough not to fall off the edge of a table; such companions could be runningerrands, helping with household chores, and assisting the handicapped. Phrasessuch as “almost certainly,” “most sophisticated,” “just smart enough,” and “could be”act as signals for opinions.

Application Activity Answers should include both facts and opinions.

D ISTINGUISHING FACT FROM OPINIONDistinguishing fact from opinion can help you make informed judgments about what otherssay and write. To do so, first identify the facts. Check the sources of the facts to make sure thatthey are reliable. Then identify opinions by looking for statements of feelings or beliefs.

Directions: Read the newspaper article excerpt below and answer the questions that follow.

President Clinton vetoed the Republicans’ $792 billion tax cut bill yesterday, killing the chances for a major tax reduc-tion this year. . . . The long-promised veto of the measure. . . underscored the deep divisions among politicians aboutwhat to do with the country’s soaring budget surpluses. . . .

Clinton. . . said the GOP tax cut bill would steer too much relief to the wealthy and leave too little money for impor-tant programs. “The bill is too big, too bloated [and] places too great a burden on America’s economy,” the presidentsaid.

Republicans fired back, . . . “It is a good bill, and I regret the president has stolen this tax cut from working Americanfamilies.”

House and Senate tax writers are eager to extend a number of popular expiring tax provisions, including a work-opportunity credit and a research and development credit, important to the high-tech industry. There also issubstantial support on Capitol Hill for restoring funding for teaching hospitals, nursing homes, home health agenciesand other activities cut from Medicare in 1997, for increasing the availability of affordable health care, and for raisingthe minimum wage.

1. Using a highlighter marker, highlight all the statements in the passage that you think are factual statements.

2. Using a pencil or pen, underline all the statements that you think are opinions.

3. How did you recognize the opinion statements?

Name Date Class

18

Reinforcing Economic Skills 18


CHAPTER 3SECTION 1, Pages 59–64 Do not get the impression that wise consumers will all make

the same choices. Remember the definition: A rational choice isone that generates the greatest perceived value for any givenexpenditure. Rational choices that are based on careful consumer

decision making will still lead to billions of different con-sumer choices yearly.

64 CHAPTER 3

Understanding Key Terms1. Define consumer, disposable income, discre-

tionary income, rational choice.

Reviewing Objectives2. What kinds of products are purchased with

discretionary income?

3. Graphic Organizer Create a diagram likethe one below to describe three things a con-sumer should consider before deciding to makea purchase.

Applying Economic Concepts4. Rational Choice List three major purchases

you’ve made in the past month. Explain whyyou think you did or did not apply rationalchoice when making the purchases.

Critical Thinking Activity



1

5. Categorizing Information Draw a circle graph like Figure 3.1—ConsumerSpending—on page 60. Develop your owncategories that reflect how you spend yourincome. Then calculate the amount youspend in each category. Transpose thisamount into a percentage to show your per-sonal consumer spending as a circle graph.For help in using circle graphs, see page xviin the Economic Handbook.

Buying Decisions If you choose thehigher-priced product, you must believethat the opportunity cost for the higherquality is worth the higher price—that noth-ing else at that instant will give you asmuch value. What two scarce resourcesare involved in every consumer pur-chase you make?

3.53.5

Decision to Spend Your $3.

2.1.

64

ReteachHave students create a flowchart,

starting with “Consumer” and end-ing with “Rational Choice,” to illus-trate the main points discussed inthe section.

1. All definitions can be found in the Glossary.2. extras such as luxury items or entertainment3. 1. Do I really require this item? 2. Is this good

or service worth the time I spent earning theincome to pay for it? 3. Is there any better usefor my income now?

4. Answers will vary. 5. Circle graphs will vary. Encourage students to

share and compare their graphs.

Have students discuss the follow-ing: You are thinking of hiring adisc jockey for a school dance.What would you consider in mak-ing this hiring decision?

Answer: income and time

16 Study Guide

Copyright ©

by The M

cGraw

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ompanies, Inc.

Name Date Class

KEY TERMS

3, 1

consumer Any person or group that buys or uses goods and services to satisfy personal needs and wants(page 59)

disposable income Income remaining for a person to spend or save after all taxes have been paid (page 60)

discretionary income Money income a person has left to spend on extras after necessities have beenbought (page 60)

rational choice Choosing the alternative that has the greatest value from among comparable qualityproducts (page 64)

For use with textbook pages 59–64


DRAWING FROM EXPERIENCE

Do you know where you can buy your favorite fashions? Are your favorite fashions the lowest incost? Are there other clothes that might be a better value? Is the cost of the clothes the only fac-tor that determines their value?

This section defines the role of a consumer and explains how consumers make purchasing decisions.

ORGANIZING YOUR THOUGHTS

Use the diagram below to help you take notes as you read through the summaries that follow. Asyou read, think about how you make purchasing decisions.

Income

Disposable income is used for:

Discretionaryincome is used for:

KEY TERMS

Reading Essentials and Study Guide 3–1

67


should you go about doing this? First, you have to obtain infor-mation about mountain bikes. You can spend time testing outfriends’ mountain bikes. As Figure 3.6 shows, you could also goto different stores and discuss the good and bad points of variousbrands and models with salespeople. Actually, as a wise con-sumer, you would do both.

How Much Information Do You Need? Information iscostly because obtaining it involves your time. You are faced withthe problem of deciding how much information to obtain. In thecase of the mountain bike, the buying principle to follow is:Obtain only as much information as is worthwhile. What, how-ever, does worthwhile mean? The value of your time and effortspent gathering information should not be greater than the valueyou receive from making the best choice of product for yourself.

Developing a Consumer Knowledge Base As you shopfor different products, you will begin to develop a consumerknowledge base. Information you obtain looking for a moun-tain bike might help you someday to make decisions aboutchoosing a car or a computer. Simply getting salespeople togive you accurate information is a skill that you can acquireand sharpen over time while you shop for other products.

One relatively easy way to obtain much information in ashort amount of time is to go to the Internet. Use a standardsearch engine to look up information on a productyou wish to buy. Also, visit the numerous sitesthat offer such products for sale.

Gathering Information When shoppingfor a product, obtain only as much information asis worthwhile. You would not, for example, want togo to every bike store in your town or city andspend two hours with every salesperson discussingevery model. In contrast, you would probably want tospend more than two minutes reading one advertisementabout one model.

3.63.6



Guided PracticeL1 Categorizing Information Havestudents create a two-column tableshowing the pros and cons of adver-tising. Call on volunteers to sharetheir tables with the class. Then leadthe class in a discussion of the fol-lowing question: What are theadvantages of advertising for me as aconsumer?






Presentation Plus!


66 CHAPTER 3

Terms to Know• competitive advertising• informative advertising• bait and switch• comparison shopping• warranty• brand name• generic brand

Reading Objectives1. What trade-offs occur

when you are gatheringinformation?

2. What forms of advertisingexist?

3. How can you learn to prac-tice comparison shopping?

READER’S GUIDE

T he goal of advertisements is to win your consumer dollars,and advertisers are willing to spend millions of dollars toattract your attention to their products. Because of the

problems of scarce income and time, however, your goal shouldbe to obtain the most satisfaction from your limited income andtime. In this section, you’ll learn about three basic buying princi-ples that can help you and all consumers achieve this goal. Theyare: (1) gathering information; (2) using advertising wisely; and(3) comparison shopping.

Gathering InformationSuppose that you want to buy a mountain bike. After you have

made this decision, you must select a brand and a model. How

BUSINESS WEEK, FEBRUARY 8, 1999

You know it’s Super Bowl season in Hollywood. Toptalent is switching focus from movies to 30- and 60-secondads that dazzle, that wow, and that keep millions ofsports fans glued to their sets during the commercialbreaks.

Companies that advertise on the championshiptelecast pay dearly for it—$3 million for one half-minute—but are rewarded with a domestic audi-ence that is expected to exceed 140 million.

2

66

OverviewSection 2 explains or describes

the trade-offs required in gatheringbuying information, various formsof advertising, and how consumerspractice comparison shopping.


Preteaching VocabularyHave students work in small

groups to brainstorm definitionsof the Terms to Know. Call on vol-unteers to give definitions andwrite them on the board. Then askstudents to compare Glossary defi-nitions with those on the board.


READER’S GUIDEAsk students what steps they

would follow to gather usefulinformation when purchasing amountain bike.

Auditory Learning Disability Some students are unable to recall words they haveheard. To develop a facility with important terms, create sentence completion exercises ona tape recorder. Record the definition for each term in a partial sentence. Leave a pausewhere the student is to complete the sentence. The student might record the answers onthe tape recorder for independent practice, review answers with the teacher or a partner,or write the answers in his or her notebook.

Refer to Inclusion for the Social Studies Classroom Strategies and Activities forstudents with different learning styles.


Daily Lecture Notes 15

L ECTURE LAUNCHERAdvertisements have a powerful effect on consumer choice. Around 60 percent of swimsuitspurchased are never used for swimming. Yet, Americans spend almost $2 billion annually onthem. How many shops would you visit and how much information would you gather beforepurchasing a swimsuit?

I. Gathering Information

A. Takes time and research

B. Try to find out only what you need to know.

C. Getting accurate information from a salesperson is a life-long skill.

D. Use the Internet to research a product and the companies selling it.


Name four major purchases in which accurate information from a salesperson wouldbe helpful? What types of information might the salesperson provide? (Answers willvary. Information should relate to the product’s quality, usefulness, competitive edge, and so on.)

II. Using Advertising Wisely

A. Advertising is everywhere.

B. Competitive advertisements try to convince people one product is better than anotherproduct and try to create brand-name recognition or loyalty.

C. Informative advertisements provide information about the product, such as price orfeatures.

D. Some advertisements use deceptive tactics, such as bait and switch, to present theirproducts.

E. They “bait” by advertising the item at a low price, but say it is out of stock when theconsumer gets to the store.

F. They “switch” by trying to sell a higher priced item instead, promoting its good features over the out-of stock item.

3-2

Copyright ©

by The M

cGraw

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ompanies, Inc.

turn

PAGES 66–67

PAGES 68–69

Daily Lecture Notes 3–2Project Daily FocusTransparency 28 and have students answer the questions.



C ONSUMERS AND ADVERTISING

1. What do you find appealing about this advertisement? Does itmake you want to buy a watch?

2. What did you learn about the product from reading the advertisement?

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69

Bait and Switch Some advertisers usedeceptive, or false, advertising. Sellers may misrepresent the quality, features, or the trueprice of goods.

One of the most widely used methods ofdeceptive advertising is bait and switch. Thebait is an advertised item at an unrealisticallylow price. When the consumer gets to thestore, the item is no longer available, or thesalesperson points out all the bad features ofthe advertised item. The salesperson thenshows the customer higher-priced models andpoints out all their good features—the switch.This practice is both deceptive and illegal.

Comparison ShoppingAfter you have gathered the information

about the make and model of the product youwant, you must decide where to buy it. It isgenerally worthwhile to get information onthe types and prices of products availablefrom different stores or companies. This processis known as comparison shopping.

To efficiently comparison shop, read newspaper advertise-ments, make telephone calls, browse the Web, and visit differentstores. Armed with prices that you obtain from the Web, negoti-ate with local merchants to get them to match (or come close to)the lowest price.

Job Description■ Oversees the

development ofadvertisements

■ Manages thecreative serv-ices and mediaservicesdepartments

Qualifications■ Bachelor’s

degree in liberal arts,advertising, or journalism

■ Knowledge ofmarketing andconsumerbehavior

Median Salary: $46,000

Job Outlook: Excellent

CAREERSAdvertisingManager

—Occupational Outlook Handbook, 1998–99

T he Internet makes price comparisonseasy. Type comparison shopping into

your search engine. You will come up withdozens of Web sites that allow you to eas-ily comparison shop when you know a

specific brand and model of an item youwish to buy. You can also use an intelligentshopping agent, a program that continuallysearches the Web to find the best price forthe item you wish to buy. ■

Comparison Shopping on the WebComparison Shopping on the Web

Economic Connection to... TechnologyEconomic Connection to...

bait and switch: ad that attractsconsumers with a low-pricedproduct, then tries to sell them ahigher-priced product

comparison shopping: gettinginformation on the types andprices of products available fromdifferent stores and companies








CHAPTER 3SECTION 2, Pages 66–70 Using Advertising

WiselyAdvertising is all around you. Whenever

you turn on the radio or television or log on tothe Internet, you will more than likely hear orsee a commercial. You also read advertising onbillboards, on posters, on buses, and so on.Figure 3.7 gives you some tips for readingthese ads, which can generally be classified ascompetitive or informative.

Competitive Advertising Advertising thatattempts to persuade consumers that a prod-uct is different from and superior to any otheris competitive advertising. Its purpose maybe to take customers away from competitorsor to keep competitors from taking away cus-tomers. Ads for well-established brand namesand products, such as Dell computers andNike shoes, are often of this type. As shown inPart A of Figure 3.8, competitive ads alsoappeal to people’s emotions.

Informative Advertising Informative advertising benefitsconsumers by giving information about a product. From suchads, you can learn about the existence, price, quality, and specialfeatures of products without spending much time or effort. SeePart B of Figure 3.8. Informative advertising may also be com-petitive in nature.

Advertising Competitive ads oftenstrive to evoke an emotional attachment toa product, whereas the purpose of infor-mative ads is to provide data on a product.

competitive advertising: adver-tising that attempts to persuadeconsumers that a product is dif-ferent from and superior to anyother

informative advertising: adver-tising that benefits consumers bygiving information about a product

3.83.8

A Competitive Advertisement

B InformativeAdvertisement

Checklist for Analyzing Ads


As you read advertisements, ask yourself:

1. Does the ad only appeal to my emotions or doesit provide facts?

2. What are the special features of the product? DoI need any of these features?

3. Does the ad tell me anything about operatingcosts?

4. Does the ad tell me anything about a product’sdurability, or ability to last?

5. Does the advertised price compare favorablywith the price of similar products?

6. Is the advertised price the entire price, or arethere extra costs in small print?

68

IndependentPracticeL3 Analyzing Information Directstudents to clip several advertise-ments from used magazines andnewspapers. Ask them to write abrief analysis of each advertisement,noting whether its main appeal is to the reader’s intelligence or emo-tions. Pair students and have part-ners compare and discuss theiradvertisements and analyses.

BLOCK SCHEDULING

For use with the textbook pages 66–70

B UYING PRINCIPLES OR STRATEGIES

FILLING IN THE BLANKS

Directions: Use your textbook to fill in the blanks using the words in the box. Some words may be usedmore than once.

Introduction/Gathering InformationThe three basic principals of buying involve gathering information, using 1 __________________________ wisely,

and 2 __________________________. A scarce resource involved in attaining information about a product is

3 __________________________.

Using Advertising Wisely Advertising that tries to persuade a person that a product is different from and superior to others is

4 __________________________. In comparison, 5 __________________________ benefits consumers by informing them

about various products. Unfortunately, advertising can also be deceiving, with such tactics as the bait and switch. The

6 __________________________ is an unrealistically priced item, that is no longer available when the consumer gets to

the store. The salesperson will try to sell the consumer a higher-priced model, this is known as the

7

Name Date Class

3-2

bait switch advertisingtime competitive advertising informative advertisingcomparison shopping brand name generic brandsprice warranty


Call on volunteers to giveexamples of competitive andinformative advertisements theyhave seen on television or heardon the radio.

Organize students into groups, and have groups develop lists of 10 common householditems. Then have groups visit at least three stores where these items are available andprice items by store and brand. Have groups include store brand and generic productprices where applicable. Have groups organize their data into tables. Then have themcompare their tables to see which is the “best buy” for each item. BLOCK SCHEDULING

Free Enterprise Activity

ReteachOrganize students into small

groups and have groups think upphrases, sayings, proverbs, jingles,or symbols that summarize themain ideas in each of the three sub-heads: Gathering Information,Using Advertising Wisely, andComparison Shopping.

Organize students into several small groups and tell groups that they work for an adver-tising agency. Direct them to create either a competitive advertisement or an informativeadvertisement for one of the following products: mountain bike, glow-in-the-dark socks, aportable CD player, the latest model of cross-training shoe, or a new snack food.Advertisements may be for the print media, television, or radio. Groups that select print mediashould create a mock-up of the advertisement itself. Groups that select television should writea script and create storyboards, while groups that select radio should write a script. Have stu-dents display or present their advertisements for the class. BLOCK SCHEDULING


8 Section Quiz

Copyright ©

by The M

cGraw

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ompanies, Inc.

Name Date Class

3, 2


Multiple Choice: In the blank at the left, write the letter of the choice that best com-pletes the sentence or answers the question. (10 points each)

6. An ad that appeals to emotions, but does not provide facts is an example of

a. bait and switch. b. competitive advertising.c. informative advertising. d. comparison shopping.

7. Which of the following is illegal?

a. selling generic brands b. bait and switchc. developing a consumer knowledge base d. competitive advertising

8. The opportunity cost of comparison shopping is

a. time you could have spent doing b. price you pay for the item you choose.something else.

c. money advertisers spend to attract your d. money you save by making a rational choice.attention to their products.

9. A wise consumer makes a decision based on

a. competitive advertising. b. comparison shopping.c. bait and switch. d. generic names.

10. Which of the following is the most efficient method of gathering information?

a. listening to ads on the radio b. going to different storesc. making telephone calls d. browsing the Web

SCORE

A1. bait and switch


3. warranty

4. brand name

5. generic brand

Ba. promise made by a manufacturer or seller to repair

or replace a product within a certain time period if itis found to be faulty

b. word, picture, or logo on a product that helps consumers distinguish it from similar products

c. deceptive advertising practice that attracts consumers with a low-priced product, then tries tosell them a higher-priced product

d. general name for a product rather than a specificname given by the manufacturer

e. getting information on the types and prices of products available from different stores and companies

Matching: Place a letter form Column B in the blank in Column A. (10 points each)

Section Quiz 3–2

SPOTLIGHT

71

SPOTLIGHT ON THE ECONOMY

Is it advertising run amok? Movie trailershave come to your ATM. And more may be

on the way. Full-motion video ads are now run-ning on the screens of automated tellermachines at some 7-Eleven stores in New York,Chicago, San Diego, and, naturally, LosAngeles. Customers have already seen comingattractions for some films at the conveniencestore, and who knows, you may yet see that StarWars trailer at your local S&L.

Trailers are a natural choice for showing offthe video capabilities of new, sophisticatedATMs, says Cassie Metzger, a marketing man-ager at Diebold, a big ATM maker. And sincepeople often stop to pick up cash before seeing

a flick, she says, a 15- or 30-secondtrailer, with sound, could

influence what theysee. The ads don’t

lengthen transactiontime. They play whilethe ATM is already

processing.

Banks, such as Union Federal Savings inIndiana, are still conservative. So far, they’ve runonly bank ads. But other advertisers are expected.After all, it’s a marketer’s dream: Customers can’tchange channels and they can’t walk away—atleast not without leaving their cash.—Reprinted from April 26, 1999 issue of Business Week by special

permission, copyright © 1999 by The McGraw-Hill Companies, Inc.

Think About It1. Where has advertising now appeared?

2. Do you think this type of advertising would have aneffect on your consumer decisions? Why or why not?

Check It Out! In this chapter you have learned aboutvarious forms of advertising. In the following article,read to learn how advertising is popping up in someunusual places.

Grab Some Cash,Check Out a FlickGrab Some Cash,Check Out a Flick


Answers to Think About It1. on the screens of ATMs2. Answers will vary. Some students will say that this kind of advertising might affect

them because they have no choice but to watch it. Others may say that they will notbe influenced and simply will ignore the ATM screen while they wait for their cash tobe dispensed.

Point out that some ATMs offeranother way of grabbing con-sumers’ attention—coupons. As wellas making withdrawals from anddeposits to their accounts, ATMusers also can opt to receivecoupons. These coupons offereverything from a few cents off asoft drink at a fast-food restaurantto free movie tickets. The couponsare dispensed with the transactionreceipt.

The ATM at the Rock and RollHall of fame in Cleveland, Ohio,plays music, not advertisements.Shaped like a jukebox, the ATMblasts snippets of rock songswhile it dispenses cash. Banksare not rushing to install musicalcash machines, however. Thejukebox model costs about$37,000 to manufacture.

To find up-to-date news andanalysis on the economy, busi-ness, technology, markets,entrepreneurs, investments,and finance, have studentssearch feature articles and spe-cial reports on the BusinessWeek Web site.www.businessweek.com



70 CHAPTER 3

warranty: promise made by amanufacturer or a seller to repairor replace a product within a cer-tain time period if it is found to befaulty

brand name: word, picture, orlogo on a product that helps con-sumers distinguish it from similarproducts

Warranties When you comparison shop, the most obviousinfluence on your decision will be the price you have to pay forthe product. However, don’t forget to find out which store offersthe best warranty, or the promise made by a manufacturer orseller to repair or replace a product if it is found to be faultywithin a certain period of time.

Brand-Name or Generic Products Another consumerchoice is between buying brand-name and generic products. Abrand name is a word, picture, or logo on a product that helpsconsumers distinguish it from similar products. Brand-nameproducts are usually sold nationwide and are backed by majorcompanies.

Some companies produce and sell generic brands, whichmeans there is no brand name at all. The word generic means“pertaining to a general class.” It is difficult to know who pro-duced the product. Brand-name products versus generic productswill be further discussed in Chapter 5.

Understanding Key Terms1. Define competitive advertising, informative

advertising, bait and switch, comparison shop-ping, warranty, brand name, generic brand.

Reviewing Objectives2. What trade-offs occur when you are gathering

information?

3. Graphic Organizer Create a chart like the one below to analyze and label at least 10 advertisements as to whether they are competitive or informative.

4. How can you learn to practice comparisonshopping?

Applying Economic Concepts5. Advertising Think of an advertisement you’ve

seen in the past week. Analyze the ad by apply-ing it to the six points in Figure 3.7 on page68. Was the ad successful in influencing yourconsumer behavior? Why or why not?




2

6. Making Comparisons Select a productthat you use every day: a hair dryer or televi-sion, for example. Do some comparisonshopping by finding at least five separatelocations that sell this product. What werethe differences in price for the product?

Ad Description Type Explain

1.

generic brand: general name for a product rather than a specific brand name given by the manufacturer

70

1. All definitions can be found in the Glossary.2. Consumers trade time and effort when gather-

ing information. For some consumers, timemay also represent money.

3. Charts will vary. Ensure that charts indicate anunderstanding of the difference betweeninformative and competitive advertising.

4. by gathering information on the types andprices of products available from differentstores or companies

5. Answers will vary. Ensure that students fullyexplain if and why they were influenced byeach advertisement.

6. Answers will vary. Encourage students to present their results in chart form.

Ask students to outline the buy-ing strategies they would followwhen buying a television.

Name Date Class

KEY TERMS

3, 2

competitive advertising Advertising that attempts to persuade consumers that a product is differentfrom and superior to any other (page 68)

informative advertising Advertising that benefits consumers by giving information about a product(page 68)

bait and switch Deceptive advertising practice that attracts consumers with a low-priced product, thentries to sell them a higher-priced product (page 69)

comparison shopping Getting information on the types and prices of products available from differentstores and companies (page 69)

warranty Promise made by a manufacturer or a seller to repair or replace a product within a certain timeperiod if it is found to be faulty (page 70)

brand name Word, picture, or logo on a product that helps consumers distinguish it from similar products(page 70)

generic brands General name for a product rather than a specific brand name given by the manufacturer(page 70)

KEY TERMS




Think about the last major item you purchased. How much information did you gather beforedeciding to purchase? Did advertisements give you plenty of information? Did you check differentstores to get the best price? Was the warranty a factor in your decision?


Studies reveal that Americansare bombarded with 3,000 to5,000 advertising messages a day.The assault is so overwhelmingthat people scarcely notice most of these messages.

http://www.businessweek.com

73

In 1962 President John F. Kennedy sent the first consumerprotection message to Congress. He stated four consumer rights:• the right to safety—protection against goods that are danger-

ous to life or health.• the right to be informed—information for use not only as pro-

tection against fraud but also as the basis for reasoned choices.• the right to choose—the need for markets to be competitive (have

many firms) and for government to protect consumers in mar-kets where competition does not exist, such as electric service.

• the right to be heard—the guarantee that consumer interestswill be listened to when laws are being written.President Richard Nixon later added a fifth right:

• the right to redress—the ability to obtain from the manufac-turers adequate payment in money or goods for financial orphysical damages caused by their products.

Help for ConsumersUsing President Kennedy’s list, Congress passed consumer-

protection legislation. Today, consumers dissatisfied with a spe-cific product can complain to the store manager or write to themanufacturer. They also may take the case to small claims courtor hire a lawyer. In addition, many private and governmentagencies are available to help consumers.

Among the private groups that aid consumers are local citi-zens’ action groups and local chapters of the Better BusinessBureau. Many major cities and some smaller ones have BetterBusiness Bureaus. The bureaus give consumers information onproducts and selling practices and help settle disagreementsbetween buyers and sellers.

Numerous federal agencies also have programs to aid con-sumers. Figure 3.10 on page 74 lists these agencies and whatthey do. States also have consumer affairs councils or agencies.

Consumer ResponsibilitiesYou have consumer responsibilities as well as rights. If a

product or service is faulty, it is the consumer’s responsibility toinitiate the problem-solving process. The Office of ConsumerAffairs suggests that you do the following:(1) Report the problem immediately. Do not try to fix a product

yourself, because doing so may cancel the warranty.(2) State the problem and suggest a fair and just solution—

replacement, refund, etc.

Consumer ProtectionGovernment laws require the inspec-tion of many products in order to pro-tect consumers’ health and safety andto raise quality standards. What fourconsumer rights did PresidentKennedy believe in?


3.93.9



Guided PracticeL1 Applying Ideas Have studentscreate a two-column chart with theheadings “Consumer Rights” and“Examples.” In the first column,have students enter the five con-sumer rights discussed in Section 3.In the second column, ask studentsto list two instances where theymight have to assert each right.






Presentation Plus!


72 CHAPTER 3

Terms to Know• consumerism• ethical behavior

Reading Objectives1. What are your rights as a

consumer?

2. What private and federalhelp can you receive as aconsumer?

3. What are your responsibili-ties as a consumer?

READER’S GUIDE

Most Americans are concerned with the reliability of theproducts and services they use. Many private groupsand government actions, like the “lemon law” in the

Cover Story above, work to ensure the well-being of consumers.Consumers themselves, however, must be proactive in their buy-ing habits. In this section, you’ll learn how consumerism, amovement to educate buyers about the purchases they make andto demand better and safer products from manufacturers, affectsyou personally.

Consumer RightsSince the early 1960s, consumerism has grown steadily.

Businesses can no longer assume it is the buyer’s responsibilityto know whether a product is safe, food is healthful, or advertis-ing is accurate. See Figure 3.9.

THE COLUMBUS DISPATCH, MAY 20, 1999

A consumer-protection bill for new-car buyers passedin the Ohio House of Representatives. Existing lawrequires the manufacturer to buy back a lemon[chronically-defective new car] after threeattempts to fix the same defect, eightattempts to fix a variety of defects, or atotal of 30 days in the repair shop. The billextends the lemon law to leased vehicles andapplies up to five years after delivery of the vehicle.

If a manufacturer tries to resell a car it has had to repurchase, the title must identify the car as a “buyback.” Consumer groups wanted the titleto say “lemon.”

3

consumerism: movement toeducate buyers about the pur-chases they make and to demandbetter and safer products frommanufacturers

72

OverviewSection 3 explains or describes

consumer rights, private and gov-ernment agencies that protect andenforce those rights, and the rela-tionship between consumer respon-sibilities and ethical behavior.


Preteaching VocabularyHave students check the

Glossary to find the definitions ofthe Terms to Know. Then pointout that people may have differentinterpretations of what kinds ofbehavior are ethical.


READER’S GUIDE

Reading Disability One approach to helping students understand what they read isknown by the acronym KWL. Apply KWL by asking students before they read to brain-storm what they know (K) about the topic covered in the section and to think about whatthey want (W) to learn about the topic. After reading, ask students to discuss what theylearned (L). By focusing on topics before reading and reviewing what they read, studentsimprove their comprehension.

Refer to Inclusion for the Social Studies Classroom Strategies and Activities for students with different learning styles.


Answer: the right to safety, theright to be informed, the right tochoose, the right to be heard

L ECTURE LAUNCHERThe National Consumers League, founded in 1899, was the first American consumer advoca-cy organization. They work to protect consumers’ health and safety and to promote fairnessin the marketplace. Have you or anyone you know ever contacted a consumer organization?Why? If you have never contacted a consumer organization, do you think the existence ofthese organizations has provided you with any benefits?

I. Consumer Rights

A. Business are now responsible for product safety, healthful food, and accurate advertising.

B. Since 1962, consumers have the right to product safety, to be informed about theirproduct, to choose from a variety of products, and to be considered in making lawsabout products.

C. Consumers also gained the right to redress or obtain payment for damages caused byproducts.


Imagine what life was like before consumer rights. How might shopping have beendifferent? (Consumers would have had no voice when they received defective products. Theywould have to have been much more conscientious when shopping, and might not have hada choice in regard to the types of products they could purchase.)

3-3

PAGES 72–73

Daily Lecture Notes 3–3

Name Date Class


ONSUMERISM

OUTLINING

Directions: Locate the heading in your textbook. Then use the information under the heading to help youwrite each answer. Use another sheet of paper if necessary.

I. Introduction—What is consumerism?

II. Consumer Rights

A. In 1962, what did President John F. Kennedy send to Congress?

B. What were President Kennedy’s four basic consumer rights?

C. What is the right to redress?

III. Help for Consumers

A. What options do consumers have to help protect themselves?

B. What is the job of the Better Business Bureau?

3-3

C


Project Daily FocusTransparency 29 and have students answer the questions.



C ONSUMER RIGHTS AND RESPONSIBILITIES

1. Give an example of an occasion when you felt that your consumerrights were violated.

2. When you purchase goods and services, do you always act as aresponsible consumer? Explain your answer.

2929

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Consumer Rights✰ The Right to Safety✰ The Right to Choose✰ The Right to be Informed✰ The Right to be Heard

Consumer ResponsibilitiesLearning as much as possible about the product or service in order to purchase

the best product at the best price



7575

Understanding Key Terms1. Define consumerism, ethical behavior.

Reviewing Objectives2. Graphic Organizer Create a diagram like the

one below to list your rights as a consumer.

3. What private and federal help can you receiveas a consumer?

4. What are your consumer responsibilities?

Applying Economic Concepts5. Consumerism Describe two examples of how

you educated yourself about a product beforebuying it.

ConsumerRights


6. Summarizing Information Prepare avideo or multimedia presentation for middleschool students that demonstrates ethicaland unethical consumer behavior. Concludethe presentation with a creative explanationof consumer rights and responsibilities.Share the presentation with the other mem-bers of your class.




3

(3) Include important details and copies ofreceipts, guarantees, and contracts tosupport your case.

(4) Describe any action you have taken totry to correct the problem.

(5) Keep an accurate record of yourefforts to get the problem solved.Include the names of people youspeak or write to and the dates onwhich you communicated.

(6) Allow each person reasonable time,such as three weeks, to solve the problembefore contacting another source.

(7) If you need to contact the manufacturer in writing, type yourletter or send an E-mail directly. Keep a copy.

(8) Keep cool. The person who will help you solve your problemis probably not responsible for the problem.

Another responsibility of consumers is to exhibit ethicalbehavior by respecting the rights of producers and sellers. Forexample, a responsible consumer will not try to return a useditem because it has been advertised elsewhere for a lower price.

ethical behavior: acting inaccordance with moral and ethical convictions about rightand wrong

Student Web Activity Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 3—Student WebActivities to learn more about the Office ofConsumer Affairs.



ReteachHave students create an outline

showing the section’s main ideasand supporting details.

1. All definitions can be found in the Glossary.2. In the outer ovals, students should write “safety,”

“to be informed,” “choice,” “to be heard,” and“redress.”

3. Private organizations give consumers informa-tion on products and selling practices; somehelp settle disagreements between buyers andsellers. Federal agencies set health and safetyrequirements, inspect products, promote freeand fair competition, and provide a great deal

of consumer information.4. to learn as much as possible about the product

the consumer wishes to buy; to initiate theproblem-solving process if a product is faulty;to behave ethically in dealing with producersand sellers

5. Examples will vary.6. Videos will vary. Encourage students to show

their finished videos to younger school mem-bers.

Have students write a paragraphon how knowing their responsibili-ties as consumers makes them bet-ter citizens.

Name Date Class

3, 3

consumerism Movement to educate buyers about the purchases they make and to demand better andsafer products from manufacturers (page 72)

ethical behavior Acting in accordance with moral and ethical convictions about right and wrong (page 75)


C ONSUMERISM


Do you pay attention to warning and safety labels on products you use? Do you think companiesshould be responsible for the safety of their products and services? What actions could you take ifyou were injured or hurt by a product you purchased?

This section focuses on the rights and obligations of consumers and the obligations of manufac-turers regarding the safety of products and services.

ORGANIZING YOUR THOUGHTS

Use this chart to help you take notes as you read the summaries that follow. As you read, thinkabout how you might become a well-informed consumer.

Help for Consumers

KEY TERMS




74 CHAPTER 3

Federal Agenciesand Consumerism

Agency

ConsumerInformation CenterProgram

Federal TradeCommission

Consumer ProductSafety Commission

GovernmentPrinting Office

U.S. Postal Service

U.S. Department ofAgriculture

U.S. Office ofConsumer Affairs(Department ofHealth and HumanServices)

Food and DrugAdministration(Department ofHealth and HumanServices)

National HighwayTraffic SafetyAdministration(Department ofTransportation)

How It Helps the Consumer

Provides free catalog of government publications on consumer topics.

Promotes competition by enforcing laws against monopolies, price fixing,false advertising, and other illegal business practices; regulates labeling ofproducts and protects the public against violations of consumer credit laws.

Protects the public against unreasonable risk of injury from consumer prod-ucts; sets product safety requirements, forbids the production and sale ofdangerous consumer products, and conducts research and education pro-grams on safety concerns for industry and the public.

Sells more than 15,000 government publications on a wide variety of topics;lists those of interest to consumers in a free booklet, Consumer InformationSubject Bibliography.

Through its Inspection Services, protects public from mail fraud and otherviolations of postal laws; through Consumer Advocate’s office, acts on com-plaints and provides information on schemes used to cheat the public.

Inspects and grades meat, fish, poultry, dairy products, and fruits and veg-etables through the department’s Food Safety and Quality Service; ensuresthat food production is sanitary and that products are labeled truthfully.

Coordinates all federal activities on behalf of consumers, advises Presidenton consumer affairs, and works for and testifies on behalf of consumer leg-islation; the Complaint Coordination Center helps solve consumer problems.

Protects the public against impure and unsafe foods, drugs, and cosmetics;researches and tests new products in these areas and ensures accuratelabeling; publishes FDA Consumer magazine and maintains regional con-sumer affairs offices.

Sets requirements for automobile safety, maintenance, and fuel economy;tests products for compliance; researches ways to save fuel and make high-ways safer; investigates complaints from consumers about vehicle safety.


74

IndependentPracticeL2 Consumer Information FileMention to students that most stateand local governments have officesthat offer advice on or protection ofconsumer rights. Have students workin groups to research the location ofthese offices in their state and com-munity. Then have group representa-tives write letters to these officesrequesting information on the ser-vices they offer. Suggest that groupscombine the materials they receive ina class “Consumer Information File.”

BLOCK SCHEDULING




Organize students into five groups, and tell groups they are developing a pamphlettitled “The Cartoon Guide to Consumer Rights.” Assign one of the following consumerrights to each group: the right to safety, the right to be informed, the right to choose, theright to be heard, the right to redress. Ask groups to create several cartoons that illustratesome aspect of their assigned topic. Call on groups to display their finished cartoonsaround the classroom. BLOCK SCHEDULINGELL


See the Web Activity LessonPlan at ett.glencoe.com for anintroduction, lesson description,and answers to the Student WebActivity for this chapter.

C ONSUMERISM

Multiple Choice: In the blank at the left, write the letter of the choice that best com-pletes the statement or answers the question. (10 points each)

6. Being protected against goods that are dangerous to life or health is a consumer’s

a. right to choose. b. right to be heard.c. right to safety. d. right to be informed.

7. By giving consumers the right to choose, the government

a. discourages competition. b. protects consumers in markets where competition does not exist.

SCORE

A1. consumerism

2. ethical behavior

3. Better Business Bureau

4. Food and Drug Administration

5. right to redress

Ba. private consumer group that helps settle

disagreements between buyers and sellers

b. movement to educate buyers about purchases andto demand safer products from manufacturers

c. the ability to obtain from manufacturers adequatepayment for damages caused by their goods

d. acting in accordance with convictions about rightand wrong

e. federal agency that protects the public againstimpure and unsafe foods, drugs, and cosmetics

Matching: Place a letter from Column B in the blank in Column A. (10 points each)

Name Date Class

3, 3

Section Quiz 3–3


77

77Your Role As a Consumer

Consumption, Income,and Decision Making

• A consumer is any person or group that buys oruses goods and services to satisfy personal wants.

• Income can be both disposable and discretionary.

• Education, occupation, experience, and health canall make differences in a person’s earning powerand thus in his or her ability to consume.

• Making consumer decisions involves three parts:(1) deciding to spend your money; (2) deciding onthe right purchase; and (3) deciding how to useyour purchase.

• When you make consumer decisions based onopportunity cost, you are engaging in rationalchoice.

Buying Principles orStrategies

• Three basic buying principles that can help youobtain the most satisfaction from your limitedincome and time are gathering information, usingadvertising wisely, and comparison shopping.

• The value of your time and effort spent gatheringinformation should not be greater than the valueyou receive from making the best choice of product.

• Most advertising falls under one of two types:competitive advertising or informative advertising.Be aware of deceptive advertising, which includesbait and switch.

• To efficiently comparison shop, read newspaperadvertisements, make telephone calls, surf theInternet, and visit different stores. Also considerthe product’s warranty, and brand-name versusgeneric manufacturers.

Consumerism

• Consumerism is a movement to educate buyersabout the purchases they make and to demand better and safer products from manufacturers.

• Consumer advocates promote the following con-sumer rights: the right to safety, to be informed,to choose, to be heard, and to redress.

• Private groups that aid consumers include localcitizens’ action groups and the Better BusinessBureau.

• Numerous federal agencies have programs to aid consumers, including the Consumer ProductSafety Commission and the Food and DrugAdministration.

• Consumers’ responsibilities include reading con-tracts and warranties, following directions forproper use of the product, initiating the problem-solving process, and exhibiting ethical behavior.

C H A P T E R

SECTION 1

SECTION 2

SECTION 3

Chapter Overview Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 3—Chapter Overviews toreview chapter information.

3

Use the Chapter 3 Summary topreview, review, condense, orreteach the chapter.

Preview/ReviewVocabulary PuzzleMaker Soft-

ware reinforces the key terms usedin Chapter 3.

Interactive Tutor Self-Assess-ment Software allows students toreview Chapter 3 content.

CondenseHave students listen to the

Chapter 3 Audio Program (alsoavailable in Spanish) in the TCR.Assign the Chapter 3 Audio ProgramActivity and give students the Chap-ter 3 Audio Program Test.

ReteachHave students com-

plete Reteaching Activity 3 in theTCR (Spanish Reteaching Activitiesare also available).

C H A P T E R 3

ECONOMICS & YOU



If you do not have accessto a videodisc player, theEconomics & You programs areavailable in VHS.

Buying Strategies Have students identify the steps they, or someone they know, took inbuying a small appliance. Encourage them to list alternative items and alternative storesexplored before the final purchase was made. Also, have them explain why these alterna-tives were explored and why they were rejected.

Economics Journal

■ Chairperson ofHARPOEntertainmentGroup, a mediaempire

■ Recipient of the1996 George FosterPeabody IndividualAchievement Awardand the 1998National Academyof Television Arts &Sciences’ LifetimeAchievement Award

■ One of the 100 mostinfluential people ofthe 20th century(Time, 1998)

■ The second mostpowerful woman inbusiness (FortuneMagazine, 1998)

Oprah Winfrey emerged froman underprivileged and

abusive childhood in ruralMississippi to become one of thewealthiest and most powerfulwomen in the United States.Today, she heads the HARPOEntertainment Group—a movie,television, and video productioncompany headquartered inChicago. Winfrey also hosts thewidely acclaimed The OprahWinfrey Show, the number-onetelevision talk show in the worldfor more than 12 years. It is seenby 33 million viewers weekly inthe United States and is broad-cast in 135 countries.

Oprah believes that her suc-cess can be attributed, in part, toher philosophy of helping others:

“As a rule, we are a societythat has based our lives and impor-tance in our lives on how much wecan accomplish through materialgoods. In the end what matters ishow were you able to serve andwho were you able to love.”

She fulfills this ideal throughgenerous donations to charities.For example, she has given mil-lions of dollars to universities,such as Morehouse College,Spelman College, and TennesseeState University. She uses hershow to encourage her viewers to“practice random acts of kind-ness” to make the world a betterplace:

“This show’s still the thing forme. It gives me the platform to tryto figure out how do you get peopleto lead better lives? How do you getfathers to spend more time withtheir children?”Checking for Understanding

1. What corporation does Oprah head?

2. In what ways does Oprah try to helpothers?

Oprah WinfreyENTREPRENEUR (1954—)

76

76

BackgroundPoint out that all of the publicity

that surrounds Oprah Winfrey’s lifehas made her an easily recognizablecelebrity. However, she has strongviews on celebrity status:

“I don’t think you should be con-sidered a celebrity just because youcan catch a ball, throw a ball, sing,talk, but because of what you havedone in your life to better some-body else’s.”

Ask students to discuss whetheror not they agree with Winfrey’sview of celebrity.

Answers to Checking for Understanding1. HARPO Entertainment Group2. She makes generous donations to charities and encourages her viewers to “practice

random acts of kindness.”

Organize students into severalsmall groups. Ask groups to uselibrary resources and the Internetto find information about OprahWinfrey’s philanthropic programs.Call on groups to present their find-ings to the class. Use these presen-tations to begin a class discussionon social responsibility.

In the fall of 1999, Winfrey tookon another job—as a college professor. She taught a classtitled “Dynamics of Leadership” atthe J.J. Kellogg School ofManagement, the businessschool of Northwestern University.

CHAPTER 3Assessment and Activities


79

ApplyingEconomic ConceptsCompetition and Market Structure Design aprint advertisement for a product of yourchoosing. After you complete the ad, use thechecklist on page 68 to analyze it. Write asentence to answer each of the questions onthe checklist. Do you think it is a competitivead, an informative ad, or both? Explain.

CooperativeLearning Project

Working in groups of four, take a copy ofthe checklist on page 63 and shop for one of the following: DVD player, portable CDplayer, or personal computer. Each of youshould keep a record of the steps you takeand the information you gather using a tablelike the one below. Compare your informa-tion with what others in the class found.

Reviewing SkillsDistinguishing Fact From Opinion Analyze theadvertisement below, then answer the ques-tions that follow.1. Which of the statements in the ad are

based on facts? Explain.2. Which of the statements are based on

opinion? Explain.

TechnologyActivityUsing E-Mail Many consumers will complainabout a defective product or lousy service tofriends and family members. Learn to ad-dress a problem purchase with someone whocan solve it—the manufacturer. Think of aproduct or service you were dissatisfied withafter purchasing it. Practice writing an E-mailto the manufacturer using the outline below.

79Your Role As a Consumer

WE DELIVER!Air freight. Ocean services. Less-than-truckload. Full truck-load. Nationally. Globally.

We’re a group of market-leading businesses that deliver in a“need-it-now” world.

We’re a $5 billion company, with 33,000 people, 25,000pieces of equipment, up to 100 jet freighters, and theindustry’s most advanced information systems.

Research how consumers in other coun-tries resolve unsatisfactory purchases. Usethe Internet to find government agencies inforeign nations that have duties similar to theUnited States Department of Commerce.

Checklist Number Step Information1.2.3.

Your AddressCity, State, Zip CodePhoneDate

Customer Service DepartmentCompany NameStreet AddressCity, State, Zip Code

Dear Customer Service Representative:

I bought a (product name, serial no., model no.) at (locationand date of purchase). Unfortunately, (state problem, historyof problem, and efforts to solve it).

I would appreciate your (state specific actions to be taken).Enclosed are copies of the following records: (list and encloseall documents connected with the problem).

I am looking forward to your reply and resolution of my prob-lem and will wait (state reasonable time period) before seek-ing third party assistance. Please contact me at the aboveaddress or by phone.

Sincerely,

CooperativeLearning Project

Tables may vary. Tables shouldrepresent a detailed account of theshopping process for the selecteditem.

Reviewing Skills1. The following phrases are based

on facts: “Air freight. Oceanservices. Less-than-truckload.Full truckload. Nationally.Globally”; “We’re a $5 billioncompany, with 33,000 people,25,000 pieces of equipment, upto 100 jet freighters.” They canbe checked by looking at statis-tics available in company andindustry records.

2. “market-leading businesses”and “industry’s most advancedinformation systems”; They arevalue judgments.

Technology ActivityE-mail letters will vary.

Encourage students to share andcompare their letters.

Analyzing theGlobal Economy

Research findings may vary. Askstudents to present their findings ina brief written report.

ASK: What manufacturer’sagreement allows you to returna watch for free repair during astated period? warranty

Chapter BonusTest Question



Identifying Key TermsWrite the letter of the definition in Column Bthat correctly defines each term in Column A.

Column A1. disposable income2. warranty3. bait and switch4. comparison shopping5. competitive advertising6. informative advertising7. generic brand8. consumer9. discretionary income

10. brand name

Column Ba. deceptive advertising b. getting information about similar types

of products and pricesc. “pertaining to a general class”d. money income left after paying taxes e. attempts to persuade consumers that

certain products are superior to othersf. written guarantee of a productg. income left after buying necessities

h. provides information about the price,quality, and features of products

i. logo on a productj. person or group that buys or uses goods

and services to satisfy personal wants

Recalling Facts and IdeasSection 11. Before you buy anything, what three ques-

tions should you ask yourself?2. Do all rational consumers think alike?

Why or why not?

Section 23. What are three important buying principles?4. What are two types of advertising?5. How much information should you obtain

before you make a purchase?

Section 36. What are the four consumer rights that

President John F. Kennedy stated?7. What are two consumer responsibilities?

Thinking Critically1. Understanding Cause and Effect Create a

diagram like the one below to explain howeducation, occupation, and location make adifference in a person’s earning power.

2. Making Generalizations Why do some peo-ple buy brand-name products and otherpeople buy generic products? What arethe trade-offs involved in this decision?

3

Self-Check Quiz Visit the Economics Today and Tomorrow Web site at ett.glencoe.comand click on Chapter 3—Self-Check Quizzes toprepare for the Chapter Test.

78 CHAPTER 3

Earning Power

78

Identifying KeyTerms1. d 6. h2. f 7. c3. a 8. j4. b 9. g5. e 10. i

Recalling Facts and Ideas1. Do I really need this? Is it worth

the time? Is there any better usefor my money?

2. No. People disagree about whatgenerates the greatest value forany expenditure.

3. gathering information, usingadvertising wisely, comparisonshopping

4. competitive advertising andinformative advertising

5. enough to make an informedchoice

6. the rights to safety, to beinformed, to choose, and to beheard

7. Answers may vary but mayinclude: to learn as much asthey can about a product beforebuying, to respect the rights ofproducers and sellers, and topractice ethical behavior.

Thinking Critically1. Better education, higher-paying occupa-

tion, and city location lead to higher earn-ing power. Lower levels of education,lower-paying occupation, and rural loca-tion lead to reduced earning power.

2. Answers may vary but might include:brand-name products ensure more consis-tent quality and reliability; generic prod-ucts offer cost savings.

Applying EconomicConcepts

Answers will vary. Ensure that studentsanalyze advertisements according to thepoints noted on the checklist.

Have students visit theEconomics Today and TomorrowWeb site at ett.glencoe.com toreview Chapter 3 and take the Self-Check Quiz.

MindJogger Videoquiz

Use MindJogger to reviewChapter 3 content.


81

81

Free Enterprise in Action

1. What is the Dell direct business model?

2. Why did Michael Dell feel that the develop-ment of the Internet was important for hiscompany?

sophomore year at the University of Texas.Instead, he went into the computer busi-ness full time, setting up Dell ComputerCorporation in Austin. Rather than upgradeold computers, Dell Computer built newones from scratch. The results were thesame. The company consistently racked upimpressive sales figures.

Dell DirectDell Computer Corporation’s success is a

result of its business approach—the directbusiness model. Rather than sell computersthrough dealers, Dell sells directly to con-sumers. Instead of having huge warehousesstacked with ready-made computers, Dellmakes computers to customer specifications.Fast delivery—within two weeks of ordering—and excellent technical service are also partof Dell’s direct business model. Thisapproach results in cheaper, more up-to-datecomputers for consumers.

At first, customers ordered computersfrom Dell by mail or telephone. After theintroduction of the Internet, Dell also offeredan online ordering service. Michael Dellimmediately saw the potential of theInternet: “[Y]ou could order anything[online]—including a computer. And thegreat thing was, you needed a computer todo this! I couldn’t imagine a more powerfulcreation for extending our business.”

Dell’s view proved correct. Today, theDell Computer Corporation Web site logsabout 2 million visitors a week. It generates$14 million in sales per day, making Dellone of the leading companies in Internetcommerce.

An Industry LeaderFrom its beginnings as a one-person,

dorm-room operation in 1983, DellComputer has grown into a multinationalcorporation. It maintains manufacturingcenters and sales offices in several coun-tries, and employs more than 24,000 peo-ple. With yearly revenues in the billions ofdollars, Dell is the world’s second-largest—only Compaq is bigger—and fastest-growingmajor computer manufacturer.

Future PlansMichael Dell’s immediate plans for his

company involve continuing growththrough increased Internet sales. To thisend, Dell launched a new Web site—Gigabuys.com—in 1999. The Dell ComputerCorporation’s original Web site sells onlyDell computers and various accessoriesneeded to run them. Gigabuys, however,sells an array of products—everything fromcomputers to printer paper. Introducingconsumers to his services, Dell hopes, willhelp achieve his long-term goal—for every-one to own a Dell computer!

Have students answer the FreeEnterprise in Action questions.

Answers to Free Enterprise In Action1. Rather than sell computers through dealers, Dell sells directly to consumers. Instead

of having huge warehouses stacked with ready-made computers, Dell makes comput-ers to customer specifications.

2. because you could buy anything on the Internet—including computers, and youneeded a computer for access to the Internet

Lead students in a discussion ofwhy they think Michael Dell wasable to achieve business success.

Focus on Free Enterprise

Dell ComputerCorporation

Michael Dell loved to tinker

with computers. By the

time he reached high school, he

could break down and

reassemble an Apple

computer with ease.

Also, he knew

exactly what he

wanted to do when

he finished

school—run his

own business. His

parents, however,

had other ambi-

tions for him. They

wanted him to be a

doctor. Bowing to their

wishes, Dell enrolled

as a premed student at

the University of

Texas in Austin

in 1983.

Student EntrepreneurMany students take on part-time jobs to

help pay their college expenses. Dell was noexception, although the job he took wasrather exceptional. He ran his own computercompany! Dell bought outdated PCs fromlocal computer stores and upgraded themwith the latest technology. At first, he soldthe refurbished PCs to university students.Then he started selling them by mail order.

As the business became more successful,Dell’s dorm room started to look like awarehouse. PCs and computer parts occu-pied every free inch of space. He even usedthe bathtub as a storage area! Of course,running the business left him little time forhis studies. When his parents discoveredthis, they were furious. They told him tofocus on his schoolwork. Dell reluctantlyagreed, promising to limit his businessactivities to the summer vacation.

Dell’s business boomed that summer. Inthe last month of the vacation, he recorded$180,000 in sales. He never returned for his

Focus on Free Enterprise

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You might introduce this featureby mentioning that Michael Dell isjust one of several young Americanentrepreneurs who used theirknowledge of computers and com-puting to create successful busi-nesses. Call on volunteers toidentify others. Students’ suggestionsmight include: Bill Gates, founder ofMicrosoft; Steve Jobs and SteveWozniak, founders of Apple; JeffBezos, founder of Amazon.com.

Review with students Dell’sdirect marketing methods. Next,ask students to identify the advan-tages of such a marketing approachin the computer industry. Studentresponses may vary. A typicalresponse might be that the computerindustry is prone to rapid technologi-cal change. By not carrying a largeinventory of assembled computers,Dell is able to add the latest technol-ogy as soon as it becomes available.Then ask students what the disad-vantages of Dell’s approach mightbe. Most students will point out thatif there were shortages of particularcomputer components, Dell wouldhave difficulty filling its orders.

More About Michael Dell Michael Dell used his expertise with computers to achievebusiness success—selling newspaper subscriptions—even before he graduated from highschool. He realized that people setting up new households—newlyweds and people mov-ing into the area, for example—would be the most likely to want newspaper subscriptions.So he obtained marriage-license and property tax lists from local government offices. Hethen used his computer to generate letters to the thousands of names on these lists. Withthe money he made from subscription sales, Dell bought himself a car—a BMW!

Extending the Content

In 1999 Dell Computer wasranked 78th among the Fortune500 companies and 210th in theFortune Global 500 listings.

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CHAPTER 3 Resource Manager CHAPTER 3 ... - SL Economics1. consumer 2. bait and switch 3. warranty 4. informative advertising 5. discretionary income 6. ethical behavior 7. consumerism