ESSENTIAL STANDARD 1.00:Understand economic activities of individuals and families.

OBJECTIVE 1.01 Understand responsible earning, spending, saving, and

borrowing.

Essential Questions

What are four basic economic activities of consumers?

What does it mean to be responsible when earning, spending, saving, and borrowing?

Consumer Economic Activities

EARNING

SPENDING

BORROWING

SAVING

When these activities are handled responsibly, individuals are more likely to achieve financial security and personal satisfaction.

How will you handle these four activities?

How financially successful will you be?

What are the four basic economic activities of consumers?

EARNING

SAVING BORROWING

SPENDING

Consumer Economic Activities Market

Economy- consumers respond to the economy as they wish in earning, spending, saving and borrowing behaviors

Other names for Market economy- capitalism, free enterprise system, private enterprise system

EARNING Earning --- gaining

money by working, owning a business, or receiving investment returns.

Money gained from earning is called earnings.

A person’s career choices, ability to find employment, and ability to advance determine his or her expected earnings and standard of living.

Factors affecting career choices, ability to find employment, and ability to advance are shown in following slides

Standard of Living the style of living

that a person can afford, according to income level

is directly affected by the career choices made by consumers.

Being a Responsible Consumer

Responsible earning involves realizing that career choices greatly affect lifetime earnings and standard of living and considering these factors when making career choices. 

Brainstorm other words or phrases describing Responsibility .

Write your list.

Being a Responsible Consumer

Other words describing Responsibility Answerable Accountable Duty Reliable Dependable

Other phrases describing Responsibility Capable of making

moral or rational decisions

Legally or ethical accountable

Having to pay debts Good judgment Being trusted

CAREER CHOICE FACTORS AFFECTING EARNINGS

What are you considering as a career?

What type of work will you do?

How much will you earn?

What will the location of your work look like?

How will your career choice affect your standard of living?

CAREERCHOICES

TYPE OF CAREER/JOB

PLACE OF EMPLOYMENTEARNINGS

WHAT CAREER CHOICE FACTORS AFFECT ABILITY TO FIND EMPLOYMENT?

    

What employment skills do you have?

What economic conditions such as recession, recovery, or prosperity affect job search?

Is there a lot of competition for jobs in your field?

Does your experience affect ability to find employment?

How does your employment skills affect your chances of getting the job?

ABILITY TO FIND EMPLOYMENT

EDUCATION LEVEL

ECONOMIC CONDITIONS

WORKPLACE TRENDS AND OPPORTUNTIES

PRIOR JOB PERFORMANCE

EMPLOYMENT SKILLS

WHAT CAREER CHOICE FACTORS AFFECT ADVANCEMENT?

   How do economic

conditions affect ability to advance?

Is there room in this job for advancement?

How does my job performance affect advancement?

What trends or opportunities can be identified?

How does my education affect advancement?

ABILITY TO ADVANCE

TYPE OF CAREER OR JOB

JOB PERFORMANCE

EDUCATIONAL LEVEL ATTAINED

WORKPLACE TRENDS AND OPPORTUNITIES

ECONOMIC CONDITIONS

Earnings Review

What three things generate earnings/money?

1.2.3.

Does Money Grow on Trees?

video link "I want money"

What Generates Money?

Working at a job

Owning a business that makes profit

Income producing investments

SPENDING

Spending --- using money to purchase goods and services.

The way a person spends money determines the value received and influences the economy.

Responsible spending includes

Researching and planning

Purchasing in advance

Making wise choices in light of opportunity costs and trade-offs that apply

Opportunity costs- the highest valued alternative that is given up when a choice is made

When you have a limited amount of money, how do you spend your money?

BENEFITS OF SPENDING

Each purchase contributes to the demand for the product or service purchased.

Spending keeps economy growing

Spending encourages prosperity (peak) in economic cycle

video link reuters recession

Economic fluctuation -ups and downs in the business cycle

BENEFITS OF SPENDING

Consumer dollars vote! (DEMAND) Affects prices of

goods and services

Affects what producers make (SUPPLY)

Affects what retailers stock on shelves for consumers

Name 2 products that are no longer produced due to low demand.

Name 2 new products that are available due to increased demand.

Are goods marked as clearance usually high or low demand?

Do you eat green catsup? Can you find it on the grocery shelf ?

Responsible spending includes researching and planning purchases in advance and making wise choices in light of opportunity costs and trade offs that apply.

Gross Domestic Product (GDP)

Dollar value of all the final goods and services produced by a nation in one year

Frequently used as measurement to determine how well an economy is performing

Gross Domestic Product

GOODS

SERVICES+

link to gdp per capita by country

SCARCITY

Have you heard news about scarcity in these areas? What other items that are scarce affect your life? Time

Only 24 Hours in Day Money Food Water Jobs Positions on ball team Attractive girls/guys in your

class # of acceptances for the

college of your choice

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 are used

Did you make any choices today due to scarcity?

Trade-offs and Opportunity Costs

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.

Lisa only has $1 after buying a ticket to the basketball game. Which item would you choose if you were Lisa? Box of popcorn Candy bar Soda 50/50 raffle ticket Give $ to friend

needing just one more $ to buy game ticket

Save for later purchaseopportunity cost video link

SAVING

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 Saving in your wallet

does not earn interest on your money!

“Later Uses” for Savings Emergencies Recurring expenses Future purchases Financial goals Retirement

Name three items you would be willing to save up $ to purchase

BENEFITS OF SAVING

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

Purchasing durable goods is considered a form of savings

Responsible saving means forming the habit of saving regularly and finding forms of saving that yield high returns

Examples of Durable goods- Bricks, jewelry, refrigerators, cars, mobile phones, household goods, consumer electronics, sports equipment

Consumables- opposite of durable goods,Also called soft or non-durable goodsUsed up in a short period of time

SAVING

Will the three items you would save for change based on your life stage?

LIFE STAGES 13-19 TEENAGE 20-30 SINGLE YOUNG ADULT 20-30 YOUNG ADULT WITH FAMILY 30-50 MIDDLE AGE 50-65 PRE-RETIREMENT 65+ RETIREMENT

Link: barney's car

Why Save?

Financial Security Having enough savings

to be able to withstand crises and emergencies

Provide for needs Provide for wants What is difference

between needs & wants?

How much do you think you will need in savings to be “financially secure”?

Savings Rate Amount of money

people save in an economy

Americans are saving less and less money while spending more on credit

link to savings rate by country comparison

BORROWING

Borrowing --- obtaining money, goods, or services at present in exchange for the promise of future payment .

“Buy now, pay later” aka CREDIT 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.

Responsible borrowing means borrowing only what can be paid back when due.

Wise use of credit can help some individuals raise their standard of living by extending their buying power.

BORROWING Reasons for

Borrowing Major purchases Emergencies Convenience Prepare for future

goals Take advantage of

good sales/offers

Examples of Borrowing Buying with a credit card Buying car on an

installment loan Payday loans Cash advances Layaway purchases Home mortgage loans

Interest Interest Rate -

Percentage of amount borrowed to be ADDED to the amount owed and paid back

Interest rates are stated as an Annual Percentage Rate (APR)

Formula to calculate interest is I=PRT I= Interest P=Principal amount

borrowed R=Interest Rate T=Time of loan in years

Example: Beth bought her first car

by borrowing $10,000 at 6% APR from SunTrust Bank.

Interest for one year is $600.

($600 =$10,000 x 1 year x 6%)

(using formula I=PRT) If she pays off the loan in

one year she will pay back $10,000 PLUS $600 interest.

Interest and Inflation

Inflation A general increase

in the cost of goods and services (rising prices)

Inflationary period time when demand

for goods/services is high and prices continue to rise

Example of an Online Interest Rate Calculator