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Chapter
© 2010 South-Western, Cengage Learning
Personal Decision Making
20.1 Making Better Decisions 20.2 Spending Habits
20
© 2010 South-Western, Cengage Learning SLIDE 2
Chapter 20
Lesson 20.1
Making Better Decisions
GOALS Apply the decision-making process to
solve consumer problems. Explain economic needs and wants that
influence consumer decision making.
© 2010 South-Western, Cengage Learning SLIDE 3
Chapter 20
The Decision-Making Process
Step 1: Define the problem Step 2: Obtain accurate information Step 3: Compare choices Step 4: Make a decision Step 5: Take action Step 6: Reevaluate
© 2010 South-Western, Cengage Learning SLIDE 4
Chapter 20
Step 1: Define the Problem The first step in the decision-making process is
to define the problem or a goal you wish to achieve.
Once it is identified, you can look for ways to resolve it in a manner that fits your financial resources now and in the future.
Because your resources are limited, you may have to make a tradeoff, which involves giving up one option in exchange for another.
© 2010 South-Western, Cengage Learning SLIDE 5
Chapter 20
Step 2: Obtain Accurate Information List all alternative solutions and the cost
of each. Do not consider sunk costs. A sunk cost is an expense that occurred in
the past for which money was spent and cannot be recovered.
© 2010 South-Western, Cengage Learning SLIDE 6
Chapter 20
Step 3: Compare Choices When you make choices, they often
involve getting something in return for giving up something else (tradeoff). The tradeoff results in an opportunity
cost, which is the value of your next best choice—what you are giving up.
© 2010 South-Western, Cengage Learning SLIDE 7
Chapter 20
Step 4: Make a Decision The decision you make will be based on
careful consideration of the problem, thorough information gathering, and analysis of that information. The wise decision in any situation is the
one that best meets your needs, is within your budget, and gives you the most value for your dollar investment.
© 2010 South-Western, Cengage Learning SLIDE 8
Chapter 20
Step 5: Take Action Take action to implement your chosen
solution. Because you have made a thorough
analysis of choices for solving your problem, you can be sure that you have made the best decision you could with the available information.
© 2010 South-Western, Cengage Learning SLIDE 9
Chapter 20
Step 6: Reevaluate After several months have passed, revisit your
decision. Are you happy with the choice you made? If not, what could you do differently next time to
make a better decision? Should you do something different now? If your needs have changed or your initial
decision isn’t working out, go through the decision-making process again to decide whether to make a change.
© 2010 South-Western, Cengage Learning SLIDE 10
Chapter 20
Economic Wants and Needs
Basic needs are the items necessary for maintaining physical life. Life-enhancing wants are items beyond
basic needs that add to your quality of life.
© 2010 South-Western, Cengage Learning SLIDE 11
Chapter 20
Individual Wants
Values Personal preferences Personal preferences or tastes are your
likes and dislikes. Income Leisure time
© 2010 South-Western, Cengage Learning SLIDE 12
Chapter 20
Collective Values
Collective values are things that are important to society as a whole. Society also influences our values, goals,
and choices because it demands social responsibility from its citizens.
© 2010 South-Western, Cengage Learning SLIDE 13
Chapter 20
Collective Values
Legal protection Employment Progress Innovations are new ideas, products, or services
that bring about changes in the way we live. Quality of environment Public goods Public goods are the goods and services provided
by government to its citizens.
(continued)
© 2010 South-Western, Cengage Learning SLIDE 14
Chapter 20
Lesson 20.2
Spending Habits
GOALS List and describe factors that influence
spending decisions. Explain how to plan for major purchases. Analyze marketing strategies that
influence spending decisions.
© 2010 South-Western, Cengage Learning SLIDE 15
Chapter 20
Factors that Influence Spending
Personal Factors Personal resources Position in life Customs, background, and religion A custom is a long-established practice that
takes on the force of an unwritten law. Values and goals
© 2010 South-Western, Cengage Learning SLIDE 16
Chapter 20
Factors that Influence Spending
Outside Factors The economy The economy refers to all activities related to
production and distribution of goods and services in a geographic area.
Technological advances The environment Social pressures
(continued)
© 2010 South-Western, Cengage Learning SLIDE 17
Chapter 20
Planning Major Purchases
Questions to ask before making a purchase: 1. Why do I want this product? 2. How long will this product last? 3. What substitutes are available and at what cost? 4. By postponing this purchase, is it likely that I will
choose not to buy it later? 5. What types of additional costs are involved, such as
supplies, maintenance, insurance, and financial risks? 6. What is the opportunity cost of this purchase? 7. What is the total cost of this product?
© 2010 South-Western, Cengage Learning SLIDE 18
Chapter 20
Planning Major Purchases
Cash or credit? Research before buying Quality and price
(continued)
© 2010 South-Western, Cengage Learning SLIDE 19
Chapter 20
Marketing Strategies Influence Spending Advertising Pricing Sales Promotional techniques
© 2010 South-Western, Cengage Learning SLIDE 20
Chapter 20
Advertising
Product advertising Advertising intended to convince consumers
to buy a specific good or service is called product advertising. A target market is a specific consumer
group to which the advertisements are designed to appeal.
© 2010 South-Western, Cengage Learning SLIDE 21
Chapter 20
Advertising
Company advertising Advertising intended to promote the image
of a store, company, or retail chain is known as company advertising.
Industry advertising Advertising intended to promote a general
product group without regard to where these products are purchased is called industry advertising.
(continued)
© 2010 South-Western, Cengage Learning SLIDE 22
Chapter 20
Pricing
The price of merchandise depends on several factors. Some of the factors that determine the
price of a product include: Supply and demand The cost of raw materials and labor Competitive pressures Seller’s need to make a reasonable profit
© 2010 South-Western, Cengage Learning SLIDE 23
Chapter 20
Pricing
Examples of pricing devices used to persuade consumers to buy: Odd-number pricing is the practice of
setting prices at uneven amounts rather than whole dollars to make them seem lower. Discounts are often available for buying in
large quantities.
(continued)
© 2010 South-Western, Cengage Learning SLIDE 24
Chapter 20
Sales
Stores advertise end-of-month sales, holiday sales, anniversary sales, clearance sales, inventory sales, and so on.
A loss leader is an item of merchandise marked down to an unusually low price, sometimes below the store’s cost. The store may actually lose money on every sale of
this item because the cost of producing the item is higher than the sale price.
However, the loss leader is used to get customers into the store in the hope that they will buy other products as well.
© 2010 South-Western, Cengage Learning SLIDE 25
Chapter 20
Promotional Techniques
Displays Contests and games Coupons Frequent-buyer and customer-loyalty cards Packaging Sampling Micromarketing Micromarketing is a marketing strategy designed
to target specific people or small groups who are likely to want certain products.
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