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Economic Activities of Consumers

Economic Activities of Consumers. 8-18-2011. EARNING. Gaining money by working, owning a business, or receiving investment returns. Money gained from earning is called earnings.

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Economic Activities of Consumers

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  1. Economic Activities of Consumers 8-18-2011

  2. EARNING • Gaining money by working, owning a business, or receiving investment returns. • Money gained from earning is called earnings. • Career choices, ability to find employment, and ability to advance determine his/hers expected earnings and standard of living.

  3. FACTORS

  4. RESPONSIBLE EARNING • involves realizing that career choices greatly affect lifetime earnings and standard of living and considering these factors when making career choices.

  5. SPENDING • using money to purchase goods and services. • The way a person spends money determines the value received and influences the economy. • Each purchase contributes to the demand for the product or service purchased.

  6. LAW OF SCARCITY • An economic system cannot produce all goods and services that consumers want, and most consumers do not have the resources to purchase everything they want. • Choices must be made about how limited resources (time, money) are used.

  7. SPENDING (cont.) • When making a choice, other alternatives must be sacrificed. • The highest-valued alternative that must be given up when a choice is made is the opportunity cost of the choice. • The choice of one item while giving up another is called a trade-off.

  8. RESPONSIBLE SPENDING • includes researching and planning purchases in advance and making wise choices in light of opportunity costs and trade-offs that apply.

  9. SAVING • putting aside money for later use. • Money may be “saved” in a bank account or in a wallet. • The form of savings used determines the financial return.

  10. “LATER USES” OF SAVINGS • Emergencies • Recurring expenses • Future purchases • Financial goals • Retirement

  11. BENEFITS OF SAVING • Provide money for future purchases • Can be used to earn income • Produce a healthy economy • Increase personal financial security • Provide growth opportunities for business ventures

  12. RESPONSIBLE SAVING • forming the habit of saving regularly and finding forms of saving that yield high returns.

  13. BORROWING • obtaining money, goods, or services at present in exchange for the promise of future payment • “Buy now, pay later.”

  14. BORROWING • Borrowing means spending future income and includes buying on credit. • Having “good credit” depends on one’s willingness and ability to pay back what is owed when it is due. • Credit purchases are more costly than cash purchases if not paid back quickly. • The wise use of credit can help some individuals raise their standard of living by extending their buying power.

  15. EXAMPLES OF BORROWING • Buying with a credit card • Buying on installment • Payday loans • Cash advances • Layaway purchases

  16. REASONS FOR BORROWING • Major purchases • Emergencies • Convenience • Prepare for future goals • Take advantage of good sales/offers

  17. RESPONSIBLE BORROWING • borrowing only what can be paid back when due.

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