Consumption FE Revised 2024-25 Working v1 PDF

Introducti on to the Financial Education Program Introduction to the Financial Education Program In this program, students will acquire knowledge that enables them to assess situations that involve taking a position, considering the options available to them and determining the Introduction to the...

Introducti on to the Financial Education Program Introduction to the Financial Education Program In this program, students will acquire knowledge that enables them to assess situations that involve taking a position, considering the options available to them and determining the Introduction to the Financial Education Program Students will also learn to recognize what influences them and to consider the legal aspects of the situations they encounter. In analyzing financial issues that affect them, students Introduction to the Financial Education Program Aims of the Financial Education program: -help students develop critical judgement in managing their personal finances. -help students develop the confidence and self-knowledge needed for financial well-being Introduction to the Financial Education Program The program has only one Takes a position competency for on a financial the purposes of issue evaluation Introduction to the Financial Education Program Techniques used and required for this course: Using a written document Using an illustrated document Using an audiovisual document Using and creating a graph Using and creating a table Using a search engine  Introduction to the Financial Education Program Financial Issue Concepts Consuming goods and services Consumption Advertising Credit/Debt Purchasing power Savings/Budgets Consumer Rights Entering the workforce Employment Remuneration Taxation Pursuing an Education Financing Qualifications Training Consumption Factors Consumpti on Consumerism Consumerism is a social and economic order that encourages the acquisition of goods and services in ever-increasing amounts. Consumerism With the industrial revolution, but particularly in the 20th century, mass production led to overproduction---the supply of goods would grow beyond consumer demand, and so manufacturers turned to planned obsolescence and advertising to Consumptio n After World War II, consumer spending no longer meant just satisfying an indulgent material Consump tion In fact, the American consumer was praised as a patriotic citizen contributing to the ultimate success of the American way Consumpti on in a System Consumption has become a mode of expression that seems to give meaning to (some) peoples lives. It is also a form of social distinction, connecting us with some people and distinguishing us for others. Consumpti on in a System Both emotions and experience play a role in how we consume Consumption plays a large part in our quest for happiness Consumpti on Consumer society Consumer society is a form of social and economic organization associated with capitalism centered on consumption. Modern Consumer Society Characteristics: Pursuit of increased pleasure, access to goods low cost materialism and services production and (increased (Lower prices) individualism supply) many advanced consumers advanced communication have a high marketing and level of techniques transportation purchasing (amazon) power Role of consumption A substantial amount of time and money is spent on consumption including time spent: working to pay for our needs and wants comparing goods and services available to us repairing and maintaining previous purchases Role of consumption A substantial amount of time and money is spent on consumption including time spent: contemplating our level of satisfaction with the goods and services we consume returning goods or exercising other rights related to consumption  Goods are items that are usually tangible, such as pens, books, salt, apples, and hats. Services are Goods and activities provided by other Services people, who include doctors, lawn care workers, dentists, barbers, waiters, or a digital videogame or a digital movie  The primary sector can involve harvesting natural resources. The secondary Sectors of sector is the manufacturing the industry. The third is tertiary sector which is the service Canadian industries. Finally, there is the Economy quaternary which includes knowledge, research, business, consulting services, etc. The distribution of the workforce across economic sectors in Canada 2021. 1.34 percent of the workforce were employed in agriculture (Primary) 19.27 percent in manufacturing 79.4 percent in services (Tertiary). Needs and Wants Economic Principles Supply and Demand Supply, demand, marketing and price- setting  Laws As the price falls demand Supply increases and As the price rises demand falls Demand As prices rise the supply increases As the prices fall the supply decreases  The laws of supply and demand are theoretical, other factors are involved Market when setting prices including: and price Pursuit of quality or perceived setting quality What people are willing to pay  Marketing Strategies Market skimming: higher price when Market new products enter the market that may be reduced depending on the and price evolution of the market. setting Market Penetration: new products are priced artificially low to stimulate sales, and then adjusted at a later date. Market and Other considerations price setting Calculation of production costs, and ensuring a good profit margin. Competitors price. The economic problem of scarcity  Opportunity cost is when you satisfy one want (or Opportunit choice) rather than an alternative choice. You are y cost giving up the opportunity to have something else you Personal. wanted. Financial. See page 10  Inflation is a continuing rise in the general price of goods and services, usually attributed to an increase in the volume of money Purcha and credit relative to available goods and services. (higher sing demand for goods) power Purchasing power is related to changes in income relative to changes in the general price of goods and services (inflation/deflation).  Types of Inflation Demand Pull Cost Push Built in Inflation Types of Inflation Demand-Pull Inflation This type of inflation is caused due to an increase in aggregate demand in the economy. Causes of Demand-Pull Inflation: A growing economy or increase in the supply of money – When consumers feel confident, they spend more and take on more debt. This leads to a steady increase in demand, which means higher prices. Types of Inflation Causes of Demand-Pull Inflation: Government spending or Deficit financing by the government – When the government spends more freely, prices go up. Increased borrowing. Low unemployment rate. Higher consumer demand Types of Inflation Effects of Demand-Pull Inflation: Shortage in supply Increase in the prices of the goods (inflation). The overall increase in the cost of living Types of Inflation Cost-Push Inflation This type of inflation is caused by: Increase in direct/indirect taxes Depreciation of Currency Types of Inflation Cost-Push Inflation This type of inflation is caused by: Crude oil price fluctuation(increase in fuel costs) Defective supply chain Interest rate increases Types of Inflation Cost-Push Inflation This type of inflation is caused by: Increase in price of inputs (Labour, Materials) Hoarding and Speculation of commodities Effects of Cost-Push Inflation  Built-in Inflation This type of inflation Types of involves a high demand for Inflation wages by the workers which the firms address by increasing the cost of goods and services for the customers Shrinkflatio n In economics, shrinkflation, also known as package downsizing, weight-out, and price pack architecture is the process of items shrinking in size or quantity while the prices remain the same.  Tipflation and tip creep are terms to describe the United States' recent widespread expansion of gratuity to more industries, as opposed to being Tipflation traditionally only prevalent in full- service restaurants. Tipflation's origins are likely the COVID-19 pandemic and the inflation surge which began in 2021. *Stagflation Effects of Stagflation Effects of Stagflation Stagflation is a stagnant economy combined with high inflation. Stagflation amounts to a killer combination and can result in an economic downturn with an increasing cost of living. Measuring Inflation Consume r Price Index Consumer Price Index A consumer price index (CPI) measures changes in the price level of market basket of consumer goods and services purchased by households. This is how the government monitors the changes in consumer Consumer Price Index The CPI data along with changes in income can be used to determine purchasing power for the consumer. This information is also used by the government to create monetary policy, and other government interventions. Consu mer Price Index Consumer Food Price Alcohol, tobacco Index Household operations and furnishings Categories of goods Shelter (rent) often controlled and Recreation , education reading services Health and personal care (prescription drugs) included in Transportation the CIP Clothing and footwear Government Interventions (Public Policy) Government Interventions (Public Policy) Public Policy generally denotes both the general purpose of government action and the views on the best or preferred means of carrying it out; more specifically it refers to government actions designed to Who influences public policy Who/What Influences Public Policy Public Opinion Public opinion has strong influence on public policy over time. The government uses statistics and political surveys to get a better sense of what the public wants. The public sometimes uses demonstrations and political organizations to influence policy makers Who influences public policy Public Opinion Governments that act on will of the public often gain popularity that leads to electoral support. Who/What Influences Public Policy Ideology Political ideology is a certain set of ethical ideals, principles, doctrines, myths or symbols of a social movement, institution, class or large group that explains how society should work and offers some political and cultural blueprint for a certain social order. Who/What Influences Public Policy Economic Conditions Economic conditions also significantly affect the policy environment and operating context for businesses. Who/What Influences Public Policy Economic Conditions The Great Recession at the end of the first decade of the twenty-first century enhanced interest and support for public investments and incentives (including in energy efficiency and renewable energy) that could help to create jobs. Who/What Influences Public Policy Interest Groups/Lobby groups/Non- Governmental organizations Interest groups include business and trade associations, professional organizations, labor unions, environmental advocacy organizations, and cause-oriented citizen groups and lobbies.. Who/What Influences Public Policy Interest Groups/Lobby groups/Non- Governmental organizations Individuals and businesses also organize into associations and interest groups for other reasons than to try to influence government. Who/What Influences Public Policy Business Associations Business efforts to influence public policy and government include not only individual company efforts but also business associations. These associations act collectively to promote public policies in the best interest of business in general and  Who/What Influences Public Policy Technological Change Technology advancements— often motivated by market and business opportunities—also affect public policy. New, lower- cost, and easier-to-use technologies can increase public support for policies that promote renewable energy and energy efficiency and that reduce environmental damage.  Definition: Governmental intervention is the intentional interference Governme of a government in a nt country’s economic system through Interventio regulatory actions. It ns refers to a situation when Economy a government is actively affecting decisions taken by individuals or organizations  Remedies to Inflation The different remedies Controlling to solve issues related to Inflation inflation can be stated as: Monetary Policy (Contractionary policy) Fiscal Policy Monetary policy Monetary policy The objective of monetary policy is to preserve the value of money by keeping inflation low, stable and predictable. Monetary policy Monetary policy adjustments allow Canadians to make spending and investment decisions with more confidence, encourages longer-term investment in Canada's economy, and contributes to sustained job creation and greater productivity. This in turn leads to improvements in our standard of living. Monetary policy Canada’s monetary policy framework consists of two key components that work together: the inflation-control target and the flexible exchange rate. This framework helps make monetary policy actions readily understandable, and enables the Bank to demonstrate its accountability to Canadians. Monetary policy At the heart of Canada’s monetary policy framework is the inflation- control target, which is two per cent, the  To achieve the inflation target, the Bank adjusts (raises or lowers) its key policy rate(Bank of Monetar Canada interest rate). y Policy  If inflation is above target, the Bank may raise the policy rate. Doing so encourages financial institutions to increase interest rates on their loans and mortgages, discouraging borrowing and spending and thereby easing the upward pressure on prices. Monetar Higher interest rates also y Policy encourage saving Monetary policy If inflation is below target, the Bank may lower the policy rate to encourage financial institutions to, in turn, lower interest rates on their loans and mortgages and Monetary policy Governments can also by and sell bonds and treasury bills that increase/decrease banks reserve deposits. This will effect how much money banks can lend out Banks must keep a reserve of cash on hand (usually 10%) the remaining deposits Monetary policy Lowering interest rates and buying bonds increases the money supply (money available to lend out). Increasing the interest rate and selling off bonds lowers the money supply. Less money available to lend out. Fiscal Policy Fiscal policy is the use of government revenue collection and expenditure to influence a country's economy. The use of government revenues and expenditures to influence macroeconomic variables developed as a result of the Great Depression, when the previous laissez-faire approach to economic management became unpopular.  Fiscal policy is the use of government taxing and spending powers to manage the behavior of the economy. Most fiscal policy Fiscal Policy is a balancing act between taxes, which tend to reduce economic activity, and spending, which tends to increase it — although there is debate among economists about the effectiveness of fiscal  Regulatory actions taken by a government in order Other to affect or interfere with decisions made by Governme individuals, groups, or nt organizations regarding interventi social and economic matters. on See page 14  Government Intervention Objectives Government intervenes in the economy in order to: Maximize the potential of resources Ensure more equitable distribution of wealth and income among the population Government Intervention Objectives Regulate trade between consumers and producers  Major Monetary policy Governmen t Fiscal Policy (government Interventio spending priorities outlined ns in a budget) Nationalisation of certain industries Major Government Interventions Redistribution of income (progressive tax, social programs) Government Intervention Major government interventions: Universal access to services deemed essential (education, Health care) Regulation of economic activities (promoting economic development Government Intervention Major government interventions: Establishment of budgetary policies  Governments generate revenue by collecting taxes and fees from the population. They use this money to fund Governme the running of various services and departments of the government. nt Revenues See government revenue and expenses (PP 15-16) Different types of tax Government revenue and expenses Government revenue and expenses  Consumption tax GST & PST  Consumption tax GST & PST  Consumption tax GST & PST Factors that Influence Consumer Habits Standard of Living & Quality of Life Consumerism affects our standard of living (wealth, comfort, material goods and necessities; quantifiable and measurable) & quality of life (well-being; subjective and intangible). Consumerism & Quality of Life Consumerism = happiness. The more things you buy, the happier you are. The more wealth you have, the happier you are. The happier you are, the happier businesses are. Factors that influence consumer Needs and Wants choices Wants are things we want but don’t need. (consumptio n) Wants vary widely from person to person Wants are also relative (age, sex, income, preferences (personal & group)). Wants are unlimited. Wants are also Individual & Collective. Maslow’s Hierarchy of Needs Maslow’s Hierarchy of Needs  Consumer Socialization Internal Factors that influence consumers Internal Cultural attitudes are developed depending Factors on when and where a affecting person is brought up. Some examples consumpti on Opposition to using credit Living a simple life Being born during the depression Always satisfying wants  Search for identity and self-esteem: Internal factors We consume according affecting to a desired or perceived Image, and consumpti socioeconomic status. on Some direct their consumption to overcome low self- esteem and build confidence.  Internal factors affecting consumption Income Gross salary total revenue before taxes and other deductions Net pay (take home pay) total income after tax and other deductions Disposable income what is left of your income after taxes. Money that you are free to spend or save as you wish. Internal factors affecting consumption Real income is income of individuals after adjusting for inflation. Access to credit  Level of education Internal Better educated people tend know factors more about consumer matters resulting in better consumer choices. affecting consumpti Better consumer skills on More education usually means more disposable income Internal factors affecting consumption Price The relative price is the price of one good or service compared to the price of other goods and services We are often tempted to buy items that are on sale---even if we don’t need it Internal Price factors When prices are high we usually spend more time when making the decision and affecting we also consider opportunity cost (what we have to do without if we spend our consumpti money on that good or service). on Price is often related to quality ( but not always)  Gender Internal factors affecting Adolescent girls tend to be consumptio more prudent in their of n consumption than boys They also tend to assert their rights more  Internal Age factors affecting consumptio Our needs and wants change with age. n Young people have more varied needs and wants that are often affected by current trends and fashions. Teens are often influenced by peers and limited disposable income.  Age continued Internal factors Young adults spend more on affecting cars and other fun stuff consumptio n Young families spend on housing and education and stuff for their kids Older people have fewer consumer needs Internal factors affecting Lifestyle consumpti on Some people consume according to their lifestyle: Yuppi Foodi DINKS es es External Factors that influence consumers  The social groups we belong to tend to have similar views on consumption and these External ideas are often Factors transmitted among the group. The group often becomes the source of information regarding what to buy External Factors The Commercial Environment: The ambiance of retail stores which might include: music, scents, wall colour, placement of products, all of which are designed to accentuate our sense of well being in stores. https://www.youtube.com/ watch?v=pGOjdY8xgNU Types of planned obsolescence Types of planned obsolescence External Factors The Commercial Environment: The ambiance in retail stores is well planned in the hopes that consumer will buy more while in the store. External Factors Highly trained sales professionals using proven sales techniques of increase our likely hood of buying the item  Marketing techniques Product placement External Factors https://www.youtube.com/watch? v=WcnIfuNdNMc External Factors Marketing techniques Product placement in film https:// www.youtube.com/ watch? v=WcnIfuNdNMc External Factors Exposure to advertising Changes in consumer habits Changes in consumer habits are influenced by: New technologies Changes in consumer habits Changes in consumer habits Changes in consumer habits are influenced by: Peer pressure Personal values Change in age and income The purchasing process See the Page 24- six steps 27 Finding reliable sources of information Reliability and relevance of information  Finding reliable sources of information Investigative Specialized journalism Magazines Market Place consumer reports le facture lemon Aid W5 CAA  Consumer Associations Finding and Public Organizations reliable Association de sources consommateurs du Quebec Office de la protection du of consommateurs etc. informati on See page 26-27 End