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Chapter 20

Economics Honors

20-1 Key Ideas

Consumer- someone who buys a product or
2 Types of income:
Disposable income- money that remains after all
taxes have been paid
Spend on needs first, then wants

Discretionary income- money remaining after

paying for necessities
Try to satisfy wants

20-1 Key Ideas

Consumerism- trying to educate consumers to
buy and spend smarter
Laws to protect consumers:
Fair packaging and labeling act- contents and
weight of products
Food Drug and Cosmetic Act- ingredients listed by
Pure Food Act- must prove products are safe

20-1 Key Ideas

BBB- Better Business Bureau
Private group
Provide info on local businesses and warn consumers

Consumer Bill of Rights

Safe product
Right to be informed
Right to choose
Right to be heard
Right to redress

20-1 Key Ideas

Consumer Responsibilities
Smart Buying
Know the product you are buying
Use ads to your advantage
Comparison shop
Consider the pros and cons of generics
Consider used items

20-1 Key Ideas

Reporting Faulty Products
Report issue
Dont void warranty
Contact seller and/or manufacturer
Keep record
Allow time

20-1 Key Ideas

If truly unsatisfactory
Complain in an appropriate way

In certain cases, contact the government

Every purchase has at least 2 scarce resources involved

Most involve an opportunity cost

20-2 Key Ideas

Budget- record of all the money you earn and
Income- the money you earn
Expenses- money you spend on everything,
including what you save
Surplus- more income than expenses
Deficit- more expenses than income

20-2 Key Ideas

Credit- borrowing money while promising to
pay it back later
Interest- cost for the use the money
Annual percentage rate (APR)- cost of credit
expressed as a percentage of the amount

20-2 Key Ideas

Credit rating- likelihood you wont pay back the
Previous credit
Job history
Financial situation, etc

Collateral- property, house, car, or other valuable that

you pledge to secure for a loan
Lender can seize if you dont pay

Credit cards- must pay off every month to avoid being

charged interest
Bankruptcy- inability to pay debts
Stays on your credit for years and people wont lend you

20-3 Key IdeasSaving and Investing

Save- set aside income for later
Interest- payment people receive when they lend
money or allow someone else to use their money
Return- profit earned by investor
Stock- partial ownership in a company typical if
company does well, stock goes up- if company does
poorly, stock goes down
Dividend- portion of company earnings
Stocks have a greater risk, but also more potential

20-3 Key Ideas

Bond- lending money to a company or government
Doesnt make a bondholder part owner of the company

Bonds raise money for a company

Government can also sell bonds when they need
Ex: war bonds

Mutual Funds
Pools of money from multiple people to invest in multiple
stocks and bonds
Less risky because your money is spread around more

20-4 Key Ideas

Impulse Buying- buying on feelings or emotion
and not thinking about it
Buying things you dont want or need
Buying things to make you feel better
Always borrowing money
Quickly lose interest in something you bought

Consider your economic goals when you make

buying decisions
Long term buying decisions