YOUR ROLE AS A CONSUMERChapter 3

Consumption, Income, and Decision Making

Consumer: Any person or

group that buys or uses goods and services to satisfy personal wants

Purchases are based on income and how much is chosen to spend or save

Consumption, Income, and Decision Making

Disposable Income The money left over

after taxes have been paid

Usually buy necessities first: food, clothing, and housing

Discretionary Income Income which can

be spent on extras such as entertainment and luxuries

Consumption, Income, and Decision Making

Factors that impact a person’s earning power:

Education Age Health Occupation Inheritance ($, property) Gender Location

City dwellers earn more than rural areas

Regional incomes vary

Consumption, Income, and Decision Making

Decision Making Do I by an item or not? Scarce resources (time and money)

Time spent on deciding what to buy Opportunity Cost (value of the highest alternative

choice you DIDN’T make) High quality product cost more than comparable

low quality product Rational Choice (when you make consumer decisions

based on opportunity costs or the alternative that has the greatest value) Choosing the item that is the least expensive from

among comparable quality products Choice varies from person to person (What do you

value??)