CONSUMER EDUCATION MODULE

MODULE IN
CONSUMER EDUCATION

TOPIC: Consumer Education

Overview
Consumer education is pivotal within the buying society. Consumers are informed on
how to make better buying decisions that directly affect the functioning of the economy.
Consumer education has become more relevant due to the rapid growth of products in the
market. Consumers need to stay informed on the effects of the economy in order to make the
best decisions.
OBJECTIVES:
At the end of the lesson, you are expected to:
1. correctly identify an issue that concerns the public. 
2. Offer the sound understanding of the marketplace and how to function in it as a wise and
thoughtful consumer.
3. Apply consumer skills such as decision making, selecting a career, interviewing process,
and managing finances including budgeting insurance, loans, taxes, etc.

Chapter 1- Economics and You

A. Consumer in the Market Place
Understanding the Characteristics of Consumer Markets
Consumers have different likes, dislikes and needs which are affected by four main
characteristics: demographic, behavioristic, psychographic and geographic. These aspects
affect what kinds of products consumers are more likely to buy and which brands they are
more likely to be loyal to.
Identify your consumer market by defining these characteristics:
 Demographic: This includes age, gender, family status, occupation, income, education,
ethnicity, religion, sexual orientation, social class and nationality. This is the foundation for
understanding your target consumer.

 Behavioristic: This characteristic defines the way consumers behave towards products. It
includes benefits they are looking for, how often they plan to use the product and how ready
they are to make a purchase.

 Psychographic: It’s important to understand what kind of lifestyle your consumer lives. This
includes their activities and interests, their attitudes and their opinions. It also covers their
personal values.

 Geographic: This characteristic relates to where the consumer lives. It can include the region
or climate, as well as how densely their area is populated and how large it is.
By understanding these four main characteristics of your consumer market, you can become
more familiar with what their needs are and how your business can meet them. Use market
research and focus groups to ascertain the characteristics of your target consumer market.
Segmenting the Customer Market
In order to target your consumers effectively, it’s important to segment them to better
understand what they are looking for. Market segmentation helps your business to better cater
to consumer needs, allowing you to build brand loyalty and earn repeat customers.
Segmentation of the customer market can involve creating products designed specifically for
that subset of customers. For example, if your business makes hand-made shoes for babies,
a way to segment the market is to create shoes especially for premature babies whose feet
are smaller than newborns.
Market segmentation can also involve communicating the benefits of your products
differently to differing groups of consumers. The message can be tweaked to appeal to your
target, while the product can remain the same. For example, if the shoes are made with
recycled material, you can tout that as a main benefit to consumers who value
 environmentally friendly business practices. However, for consumers who care more about
style, you can discuss the unique designs as the main benefit.
Reaching the Target Consumer Market for Your Business
Once you have a solid understanding of who your consumer market is and how you can
segment them to better appeal to their needs, it’s time to create a strategy to reach them. How
will your business share your benefits with your target market so that they will be compelled to
make a purchase?
The consumer in the marketplace is bombarded with marketing messages from several
different brands, many of which may be your competitors. In order to make your marketing
efforts stand out, it’s important to do your homework and carefully craft your campaign:
 Go where your consumers are: Target your marketing efforts where you will get the most
views. If your target market is seniors who are not web-savvy, don’t create a social media
marketing campaign, for example.

 Tailor your messaging: All consumers don’t have the same interests, so don’t try to appeal
to them with the same messaging. Be sure to carefully craft what you’re going to say based on
the interests and needs of your market segment.

 Measure your results and make a pivot: Always track your efforts to see whether or not
they are successful. Make small changes to reassess your campaign until you find the results
you’re looking for. 
B. Need and Wants

Wants vs. Needs

Two people could argue for hours about whether a given product or service is a need.
Obviously, circumstance and frames of reference are important in this discussion. What one
person needs, another person wants. Also, there are a variety of ways to meet a need or a
want.
For example, we all need to eat. But does that mean we need to eat a filet mignon with fresh
steamed vegetables and a nice glass of white wine? While at first glance it's easy to assume the
difference between wants and needs, when you really start getting into it, the differences can be
difficult to articulate.

Wants, Needs and Economics

Quite simply, the economic definition of a need is something needed to survive. In economics,
the idea of survival is real, meaning someone would die without their needs being met. This
includes things like food, water, and shelter.
A want, in economics, is one step up in the order from needs and is simply something that
people desire to have, that they may, or may not, be able to obtain. Again, with those two simple
definitions, it doesn't seem like there should be much to talk about, but there is. Economics
deals with how we allocate scarce resources, and those scarce resources may be needed to
meet someone people's needs and other people's wants. So, we do need to talk about wants
and needs.
Imagine a farmer of barley. After his harvest he has two potential customers: one that wants to
buy his barley in the hopes to make an import beer and the other that wants to use the barley to
make bread. Most people, if answering seriously, could acknowledge that bread is more
important in a healthy diet than beer. Who does the farmer sell to? Should the reason someone
wants to buy his product matter? Shouldn't he just sell for the highest price? These are the
difficult questions about wants and needs that economics struggles to answer.

Practice Activity no. 1

Instructions
 Read the scenario below.
 Follow the steps to figure out Pechola’s monthly budget.
 Answer the reflection questions.
Scenario: Pechola just moved out of her parents’ house and into her first apartment. She has a
job as an assistant teacher and brings home Php 24,200 each month.
The items in the table on the next page are the things Pechola spends money on in a typical
month.

 Add the monthly costs together to figure out if Pechola stays in her budget. ° Write the
total at the bottom of the monthly cost column.
  Decide whether each item is a need or a want and check the appropriate box in the
“Need or want?” column.
 Decide which items you think should be in Pechola’s budget. Write each item’s cost in
the “Your choices” column and calculate their total cost.

ITEM MONTHLY COST NEED OR WANT? YOUR CHOICES

Car Payment Php 12000
Special coffee from a Php 350
coffee shop
Rent Php 5000
Streaming TV service Php 500
Dinners out with Php 1500
friends
Groceries Php 1000
Savings Php 2000
Cell phone Php 1500
Movie and snacks at Php 850
the theater
Total

Practice Activity no. 2

Reflection Question
1. Did you stay within Pechola’s budget?

2. If so, was it hard to stay within Pechola’s budget? Why or why not?

3. If not, which itme(s) could Pechola do without to stay within her budget?

4. If this were your budget, which items would you select?

C. Supply and Demand
The Basics of Demand and Supply
Although a complete discussion of demand and supply curves has to consider a number
of complexities and qualifications, the essential notions behind these curves are straightforward.
The demand curve is based on the observation that the lower the price of a product, the more of
it people will demand. There may be occasional exceptions to this behavior (and indeed
economists have developed the theoretical possibility of such an exception), but they are so few
and transient that economists refer to the negative relationship between price and quantity
demanded as the “law of demand.” Because of the law of demand, demand curves (such as D
in the figure) are always shown as downward sloping, with the price on the vertical axis and the
quantity demanded (over some period) on the horizontal axis.
The basic notion behind the supply curve is that the higher the price of a product, the
more of it producers will supply. In other words, as with the curve S in the figure, supply curves
are upward sloping. A justification for this upward-sloping relationship between price and
quantity supplied is that the cost of producing additional units of the product increases as more
is produced. So it takes a higher price to motivate additional output. But this is not necessarily
the case when there is time for new firms to enter an industry, or for existing firms to expand
their plant size. Such long-run adjustments to a higher price can permit more of the product to
be made available at the original cost (or even a lower cost), in which case the supply is
horizontal (or negatively sloped). But over periods of time that can extend to several months or
more, it is reasonable to assume that supply curves slope upward.
Obviously, a lot of things affect the amount of a product that will be demanded and
supplied besides its price. But for any set of demand and supply curves, all of these other
influences are held constant, since the purpose of the analysis is to allow us to concentrate on
the effects of the product’s price on the amount demanded and supplied.
Communicating through the Market
The simple diagram here allows us to consider the most important insight from demand and
supply analysis, which is how people coordinate their decisions by communicating through
market prices.
 Assume that we start off with a price for denim jeans given by P 1 in the figure. The most
important thing about that price from an economist’s perspective is that it fails to coordinate the
decisions of suppliers and consumers. At price P1 suppliers are willing to supply only QS pairs of
jeans, but consumers want to buy QD pairs. Consumers will be frustrated because they are
unable to obtain all the jeans they want at the prevailing price, and in response to this frustration
they will start bidding up the price of jeans relative to the price of other products. By doing so,
they communicate to suppliers that they want more resources devoted to the production of
additional jeans because they are worth more than what those resources are currently
producing elsewhere. Suppliers respond appropriately to this information by moving up the
supply curve, increasing the availability of jeans.
But the increase in price does more than communicate information from consumers to
suppliers. It also is the means by which consumers communicate valuable information to one
another. As consumers bid up the price of denim jeans, they are telling each other that these
jeans are in short supply and that everyone should economize on their use, take better care of
the ones they have, use substitute clothing, and so on. And consumers respond appropriately to
this information by backing up the demand curve as they reduce the number of jeans they
demand. This process continues to increase the price of denim jeans until it reaches P* in the
figure, the price determined by the intersection of the demand and supply curves. This price is
often called the equilibrium price, because at P* there is no pressure for the price either to
increase or decrease. (Our discussion could have started at a price greater than P* and the
communication would have taken the form of price decreases.) At P* we can clearly observe the
miracle of market communication and cooperation. Millions of people pursuing their private
advantages as consumers and producers, with almost no direct knowledge of, or interest in, the
concerns and circumstances of others, are led to a completely coordinated pattern of decisions
by responding to the information contained in market prices. Each consumer decides to
consume an amount perfectly compatible with the amounts that all other consumers are
deciding to consume and all producers are deciding to supply.
It’s the Process
The equilibrium price, along with the equilibrium quantity Q* in the figure, is typically
presented as the most important feature of demand and supply analysis. But seldom do real-
world markets ever get to equilibrium. The world is constantly changing, and demand and
supply curves constantly shift. Equilibrium is a moving target. The most important insight from
demand and supply analysis is that the market process is constantly directing people to
accommodate one another in ways that move them toward the coordination represented by
equilibrium, and not just for one product, such as denim jeans, but for thousands of products.
Things may not stay still long enough for equilibrium to be reached in any market. But freedom
and market communication accomplish a pattern of cooperation that can never be duplicated by
the coercion of central planning.
One of the best ways to appreciate the coordination and cooperation of market communication
is by considering the problems that arise when political authorities censor it with price controls.
In my next three columns, I’ll use the demand-and-supply framework to examine those
problems in detail.
D. Economic System
An economic system is a means by which societies or governments organize and distribute
available resources, services, and goods across a geographic region or country. Economic
systems regulate the factors of production, including land, capital, labor, and physical resources.
An economic system encompasses many institutions, agencies, entities, decision-making
processes, and patterns of consumption that comprise the economic structure of a given
community.
Types of Economic Systems
There are many types of economies around the world. Each has its own distinguishing
characteristics, although they all share some basic features. Each economy functions based on
a unique set of conditions and assumptions. Economic systems can be categorized into four
main types: traditional economies, command economies, mixed economies, and market
economies.
1. Traditional economic system
The traditional economic system is based on goods, services, and work, all of which follow
certain established trends. It relies a lot on people, and there is very little division of labor or
specialization. In essence, the traditional economy is very basic and the most ancient of the four
types.
Some parts of the world still function with a traditional economic system. It is commonly found in
rural settings in second and third world nations, where economic activities are predominantly
farming or other traditional income-generating activities.
There are usually very few resources to share in communities with traditional economic
systems. Either few resources occur naturally in the region or access to them is restricted in
some way. Thus, the traditional system, unlike the other three, lacks the potential to generate
a surplus. Nevertheless, precisely because of its primitive nature, the traditional economic
system is highly sustainable. In addition, due to its small output, there is very little wastage
compared to the other three systems.
2. Command economic system
In a command system, there is a dominant centralized authority – usually the government – that
controls a significant portion of the economic structure. Also known as a planned system, the
command economic system is common in communist societies since production decisions are
the preserve of the government.
If an economy enjoys access to many resources, chances are that it may lean towards a
command economic structure. In such a case, the government comes in and exercises control
over the resources. Ideally, centralized control covers valuable resources such as gold or oil.
The people regulate other less important sectors of the economy, such as agriculture.
In theory, the command system works very well as long as the central authority exercises
control with the general population’s best interests in mind. However, that rarely seems to be
the case. Command economies are rigid compared to other systems. They react slowly to
change because power is centralized. That makes them vulnerable to economic crises or
emergencies, as they cannot quickly adjust to changing conditions.
3. Market economic system
Market economic systems are based on the concept of free markets. In other words, there is
very little government interference. The government exercises little control over resources, and
it does not interfere with important segments of the economy. Instead, regulation comes from
the people and the relationship between supply and demand.
The market economic system is mostly theoretical. That is to say, a pure market system doesn’t
really exist. Why? Well, all economic systems are subject to some kind of interference from a
central authority. For instance, most governments enact laws that regulate fair trade
and monopolies.
From a theoretical point of view, a market economy facilitates substantial growth. Arguably,
growth is highest under a market economic system.
A market economy’s greatest downside is that it allows private entities to amass a lot of
economic power, particularly those who own resources of great value. The distribution of
resources is not equitable because those who succeed economically control most of them.
4. Mixed system
Mixed systems combine the characteristics of the market and command economic systems. For
this reason, mixed systems are also known as dual systems. Sometimes the term is used to
describe a market system under strict regulatory control.
Many countries in the developed western hemisphere follow a mixed system. Most industries
are private, while the rest, composed primarily of public services, are under the control of the
government.
Mixed systems are the norm globally. Supposedly, a mixed system combines the best features
of market and command systems. However, practically speaking, mixed economies face the
challenge of finding the right balance between free markets and government control.
Governments tend to exert much more control than is necessary.
Economic systems are grouped into traditional, command, market, and mixed systems.
Traditional systems focus on the basics of goods, services, and work, and they are influenced
by traditions and beliefs. A centralized authority influences command system, while a market
system is under the control of forces of demand and supply. Lastly, mixed economies are a
combination of command and market systems.
E. Consumer Decision-Making Sytem
The consumer decision-making process can seem mysterious, but all consumers go through
basic steps when making a purchase to determine what products and services will best fit their
needs. 
Think about your own thought process when buying something––especially when it’s something
big, like a car. You consider what you need, research, and compare your options before taking
the plunge. Afterwards, you often wonder if you made the right call. 
If you work in sales or marketing, make more of an impact by putting yourself in the customer’s
shoes and reviewing the steps in the consumer decision-making process.
Steps in the consumer decision process
Generally speaking, the consumer decision-making process involves five basic steps. Start to
understand the unique decision process of your customers with this decision flowchart template.
Overview of the Consumer Decision-Making Process
1. Problem recognition
The first step of the consumer decision-making process is recognizing the need for a service or
product. Need recognition, whether prompted internally or externally, results in the same
response: a want. Once consumers recognize a want, they need to gather information to
understand how they can fulfill that want, which leads to step 2.
But how can you influence consumers at this stage? Since internal stimulus comes from within
and includes basic impulses like hunger or a change in lifestyle, focus your sales and marketing
efforts on external stimulus. 
Develop a comprehensive brand campaign to build brand awareness and recognition––you
want consumers to know you and trust you. Most importantly, you want them to feel like they
have a problem only you can solve.
Example: Winter is coming. This particular customer has several light jackets, but she’ll need a
heavy-duty winter coat if she’s going to survive the snow and lower temperatures.
2. Information search

Content Map With Funnel (B2C) Example

When researching their options, consumers again rely on internal and external factors, as well
as past interactions with a product or brand, both positive and negative. In the information
stage, they may browse through options at a physical location or consult online resources, such
as Google or customer reviews.
Your job as a brand is to give the potential customer access to the information they want, with
the hopes that they decide to purchase your product or service. Create a funnel and plan out the
types of content that people will need. Present yourself as a trustworthy source of knowledge
and information. 
Another important strategy is word of mouth––since consumers trust each other more than they
do businesses, make sure to include consumer-generated content, like customer reviews or
video testimonials, on your website.
Example: The customer searches “women’s winter coats” on Google to see what options are
out there. When she sees someone with a cute coat, she asks them where they bought it and
what they think of that brand.
3. Alternatives evaluation
At this point in the consumer decision-making process, prospective buyers have developed
criteria for what they want in a product. Now they weigh their prospective choices against
comparable alternatives.
Alternatives may present themselves in the form of lower prices, additional product benefits,
product availability, or something as personal as color or style options. Your marketing material
should be geared towards convincing consumers that your product is superior to other
alternatives. Be ready to overcome any objections––e.g., in sales calls, know your competitors
so you can answer questions and compare benefits.
Example: The customer compares a few brands that she likes. She knows that she wants a
brightly colored coat that will complement the rest of her wardrobe, and though she would rather
spend less money, she also wants to find a coat made from sustainable materials.
4. Purchase decision
This is the moment the consumer has been waiting for: the actual purchase. Once they have
gathered all the facts, including feedback from previous customers, consumers should arrive at
a logical conclusion on the product or service to purchase.
If you’ve done your job correctly, the consumer will recognize that your product is the best
option and decide to purchase.
Example: The customer finds a pink winter coat that’s on sale for 20% off. After confirming that
the brand uses sustainable materials and asking friends for their feedback, she orders the coat
online.
5. Post-purchase evaluation
This part of the consumer decision-making process involves reflection from both the consumer
and the seller. As a seller, you should try to gauge the following:
 Did the purchase meet the need the consumer identified?
 Is the customer happy with the purchase?
 How can you continue to engage with this customer?
Remember, it’s your job to ensure your customer continues to have a positive experience with
your product. Post-purchase engagement could include follow-up emails, discount coupons, and
newsletters to entice the customer to make an additional purchase. You want to gain life-long
customers, and in an age where anyone can leave an online review, it’s more important than
ever to keep customers happy.
Tools to better understand your customer
Putting yourself in the customer’s shoes can help you steer consumers towards your product.
Here are some tools to help you analyze their decision-making process and refine your brand
marketing and sales tactics.
Customer journey map
A customer journey map visualizes a hypothetical customer’s actions. Use it to empathize with
your customers as they go through a specific process or try to complete a purchase. Map out
the actions the customer is likely to take.
Learn how to make a customer journey map to understand the decision-making process for your
product/service.
Customer Journey Map Example
Empathy map
Empathy maps help teams understand the customer’s mindset when dealing with a product or
service. They can be used for personas or specific customer types. Empathy mapping is often
most helpful at the beginning of a new project. Collaborate as a team to quickly get inside the
heads of your customers during every step of product development, testing, and release.
Learn how empathy maps work so you can understand your customers better and make
customer-oriented decisions.

Basic Empathy Map Example

User personas
Based on user research or past user interactions, user persona cards construct fictional or
composite personas that break down and organize your data into distinctive types of users.
Build a more human picture of your users and understand your user base better by creating
user personas for the various types of users for your product or service.

User
Persona Card Example
Understanding the consumer decision-making process is key if you want to attract more
customers and get them to make that crucial purchase. Use this process and the tools above to
tune in to consumers and genuinely understand how to reach them.

Learning Activity no. 1

Answer the following question.
1. What is the importance of knowing the target consumer market for your
business?

2. Define need. Define want. What is the primary requirement distinguishing a need
vs. a want?

3. Is there any overlap between products used to meet needs and wants?

4. Explain the law of supply and demand.

5. Discuss the steps in the consumer decision process

Chapter 2- Introduction to Consumers Behavior

The behavior that consumers display in searching for, purchasing, using, evaluating, and
disposing of products and services that they expect will satisfy their needs.

A. Personal Consumer
The individual who buys goods and services for his or her own use, for household use, for the
use of a family member, or for a friend.
What is Consumer Behavior?
The study of how consumers
 Select
 Purchase
 Use
 Dispose of Goods and services in the process of satisfying their personal and household
needs and wants.
B. Development of the Marketing Concept
 Production Concept
 Selling Concept
 Product Concept
 Marketing Concept
Other factors that contributed to the growing interest in consumer behavior
 The accelerated rate of new product development
 The consumer movement
 Public policy considerations
 Environmental concerns
 The opening of national markets throughout the world
Consumer behavior is more than just purchasing
Consumer Behavior involves
 Exposure to the media
 Browsing
 Influencing others
 Being influenced by others
 Complaining about and returning products
Economics alone does not explain consumer behavior
 Early theories based on notion that individuals act rationally to maximize their benefits
(satisfaction) from purchasing
 Later research discovered that consumers are just as likely to
 Purchase impulsively
 Be influenced by family, friends, advertisers and role models
 Be influenced just as strongly by mood, situation and emotion
Consumer behavior is an Interdisciplinary Field

Anthropology
Psychology Consumer
Behavior
studies

Social
Psychology Economics
Other
Fields

The Production Concept

• Assumes that consumers are interested primarily in product availability at low prices
• Marketing objectives:
o Cheap, efficient production
o Intensive distribution
o Market expansion
The Product Concept
 Assumes that consumers will buy the product that offers them the highest quality, the
best performance, and the most features
 Marketing objectives:
o Quality improvement
 o Addition of features
o Tendency toward Marketing Myopia
The Selling Concept
 Assumes that consumers are unlikely to buy a product unless they are aggressively
persuaded to do so  Marketing objectives:
 Sell, sell, sell  Lack of concern for customer needs and satisfaction
The Marketing Concept
 Assumes that to be successful, a company must determine the needs and wants of
specific target markets and deliver the desired satisfactions better than the competition
 Marketing objectives:
 An operating philosophy of business in which the consumer is the focal point of the firm’s
activities
 Embodies the view that industry is a customer satisfying process, not a goods-producing
process (the “selling concept”)
 Key assumption is that, to be successful, a company must determine the needs and
wants of specific target markets and deliver the desired satisfactions better than the
competition
C. Trends influencing consumer behavior in contemporary
society

1. Growth of the information superhighway

Positive Implications
 Marketers can be in touch with anyone, anywhere and at any time  Availability of information
increases consumers’ knowledge and power in the marketplace.
Negative Implications Increased information about consumers raises serious privacy issues
Creation of a digital divide that further stratifies society based on wealth, education and age
2. Focus on health, fitness, and beauty
Golden opportunities are created for marketers of many products ranging
from fat-free foods or vitamins, as well as for services ranging from plastic
surgery to hair implants.
3. Shifting roles of men and women
 More women in the workforce
 More women in management positions
 More women raising children alone
 Gay and lesbian families changing the traditional model of the family
4. Telecommuting and the office of the future
 Decline in demand for products and services such as cars, public transportation,
automobile insurance, car repair, child care, and babysitting services
 Increased need for efficient package-delivery services
 Rise in demand for state-of-the-art communication devices
5. Emphasis on leisure
 People engage in leisure activities for different reasons
 Knowing those reasons helps marketers select appropriate promotional appeals
D. Implementing the Marketing Concept
Segmentation, Targeting, and Positioning
 Segmentation: process of dividing the market into subsets of consumers with common
needs or characteristics
 Targeting: selecting one ore more of the segments to pursue
 Positioning: developing a distinct image for the product in the mind of the consumer
Successful Positioning
 Communicating the benefits of the product, rather than its features
 Communicating a Unique Selling Proposition for the product
The Marketing Mix
 Product
 Price
 Place
  Promotion
The Societal Marketing Concept
 All companies prosper when society prospers.
 Companies, as well as individuals, would be better off if social responsibility was an
integral component of every marketing decision.
 Requires all marketers adhere to principles of social responsibility.

Learning Activity no. 2

Direction: Answer the following question
1. What is the importance of knowing the consumer behavior?

2. Why did consumer behavior become a separate discipline from marketing?

3. What do buying decision Involve? Consider a decision to acquire a pet.

Chapter 3- Consumer Protection

A. Consumer Rights and Responsibilities
A Consumer Bill of Rights Right to . . .
►Safety
►Be informed
►Choose
►Be heard
►Redress
►Consumer education
►A healthy environment
Rights Carry Responsibilities Responsibility to . . .
►Use products safely
►Use information
►Choose carefully
►Express satisfaction or dissatisfaction
►Seek redress
►Be an educated consumer
►Contribute to a healthy environment

Practice Activity No. 1

1. As a consumer, what rights are you entitled to when dealing with businesses that sell
goods and services?

2. What responsibilities do you have in return?

B. Government and Consumer Protection

The Rise of the Consumer Movement
►A growing concern
►A growing awareness
►The consumer movement
Government Protection
►Federal Trade Commission
►Consumer Product Safety Commission
►Environmental Protection Agency
►State and local protection
►Consumer movement today
Warranties
 ►The Magnuson-Moss Warranty Act
►Full warranty
►Limited warranty
►Implied warranties

Practice Activity no. 2

1. Why do many people feel that consumers need protection more now than in the
past?

2. What federal agencies are charged with protecting consumers from false advertising,
dangerous products, and pollution?

3. What differences are there between full and limited warranties?

4. How do warranties benefit businesses that offer them?

C. Deception and Fraud

Deception
►Trading up
►Sale price
►Suggested retail price
►Loss leader
Fraud
►Fraud: deliberate deception, designed to secure unfair or unlawful gain.
►A statement is fraudulent if it meets these two conditions:
 The person who made the statement must know it is false.
 The purpose of the statement must be to cause others to give up property that
has value, such as money.
Examples of Fraud
►Bait and switch
►Pyramid schemes
►Internet and telephone fraud
Internet and Telephone Fraud Watch out for . . .
►Deal offered seems too good to be true
►Credit card/Social Security number requested to verify identity
►Must buy item to get something else for free
►No written contract or sales agreement is provided
►You “must act now” or offer expires
►No method given to contact the organization
►Information about organization not available from independent sources
The Many Faces of Fraud Examples:
 Healthcare products that promise to cure incurable diseases
 Home-improvement contractors who want payment before doing any work
 Vacation clubs that require money in advance with the promise of inexpensive first-
class vacations later
 Repair work offered for less than the going rate
 Weight-loss programs that promise unrealistic results

Practice Activity no. 3

1. What is the definition of a deceptive selling practice?

2. How can you protect yourself against fraudulent selling practices?

D. Resolve Consumer Problem

Prepare to Make a Complaint Write down the facts
►The date and location of the transaction
►A description of the product
►The product’s price and your method of payment
►A specific explanation of what is wrong
►A statement of how you want the problem resolved
The Complaint Process
 ►Start with the seller
►Seek help from consumer organizations
►Better Business Bureau (BBB)
►Arbitration
►Media help
Government Efforts to Help Consumers
►Truth in information
►Enforcement is difficult
►Use common sense
►Cooling-off periods
►Reporting consumer problems
►Using small claims court

Practice Activity no. 4

1. At which step of the complaint process is an organization such as the Better
Business Bureau best able to help a consumer?

2. What are several ways in which the government works to protect consumers?

Chapter 4- Money Management and Credit and

Debt Management
A. Developing a Budget
Creating a budget for your family may seem like a lot of work, but it's not. Read the three steps
below to see what information you'll need to gather. Then set aside a couple of hours to
calculate, create and review your budget. Remember that when you follow a budget, you're
more likely to stay on track in your spending and saving plans.

1. Total your monthly household income

Calculate how much you bring home a month. Income includes:
 What's left of your paycheck AFTER taxes and deductions, often called “Net Pay” on your pay
stub.
 Cash benefits from Social Security payments, temporary assistance for needy families (TANF),
and other public assistance programs.
 Additional earnings from alimony payments, child support, a part-time job, or other income
sources.
 If your income changes month to month, take an average of the last three months and use as
your monthly income.

 2.  Total your monthly household expenses

Make a list of all your monthly expenses. You can use a budget form as a guide. You can also
track where your money goes by writing down every purchase and payment you make in a
journal. At the end of the month, add up all the expenses.
You'll see that your spending is generally categorized as:
 Fixed expenses that you must pay, such as rent, electric bill, car payments; and
 Flexible expenses that change month to month, like groceries and entertainment.

 3. Subtract expenses from income

 If your income is more than your expenses, consider saving it in a bank account.
 If your expenses are more than your income, you'll need to think about reducing your expenses
or increasing your income.
 To help keep your fixed expenses at a manageable level, we offer tips on finding the lowest gas
and oil prices in Westchester, as well as how to save energy and money. You can also examine
your flexible expenses as there may be more opportunities to reduce your spending.
B. Benefits of a Bank Account
 
If you use check-cashing outlets or the piggy bank, you're missing out on the many benefits of
managing your money with a bank account.
 1. Bank accounts offer convenience
For example, if you have a checking account, you can easily pay by check or through online bill
pay. It's also cheaper than buying a money order (and you'll have proof of bank statements that
you paid your bills). If you get an Automated Teller Machine (ATM) or debit card for the account,
you can withdraw money easily or make payments at stores. A debit card is usually accepted for
purchases anywhere credit cards are accepted.

2. Bank accounts are safe

Your money will be protected from theft and fires. Plus, your money will be federally insured so
if your bank or credit union closes, you will get your money back. The maximum amount of
money that can be insured is $100,000.

3. It's an easy way to save money

Many banks offer an interest rate when you put your money in a savings account. The interest
will help your money grow over time. Be sure to shop around and check what fees are involved -
you don't want to wind up paying more in fees than you are gaining in interest.

If you have a checking and saving account with the same institution, you can have your money
transferred periodically from checking to savings, putting the money aside to help grow your
savings.

4. Bank accounts are cheaper

Banks and credit unions generally offer their account holders free or low-cost services:
 Cashing checks:  Using a check cashing outlet really adds up. You can deposit and cash your
checks at the institution where you have a bank account for free.
 Paying bills:  Without a bank account, you probably rely on check cashing outlets, telephone bill
pay or money orders—all of which have attached fees—to pay your bills. With a checking
account, you can write checks for free or pay online at a low cost.
 Transferring/wiring money:  If you use a money transfer company to wire money to another
person’s account, you will pay a fee, usually a percentage of the amount of the
transfer. Depending on the amount you want to transfer, this fee can be expensive. If you wire
from your bank account to another person’s account, your bank will usually charge a flat rate
that is generally lower than the money transfer company.
 Accessing cash:  When you need cash but don’t have a bank account, you may decide to use a
credit card to get a cash advance from an ATM. The credit card company will charge you a
transaction fee and interest. If you have a bank account and an ATM or debit card, you can
access your money from your own bank’s ATM for free. Although you can access your money
from any ATM, you will likely pay a transaction fee if you use an ATM other than your bank.

5. Bank accounts can help you access credit

Banks and credit unions can help you access credit to acquire a home, a car, student or personal
loan, because banks tend to favor existing customers, particularly those who manage their
money well. Plus, going to small loan lenders that lend you cash quickly can be quite expensive
because they charge lending fees and high interest rates.

While bank accounts are preferred over check cashers and piggy banks, banks will also have
fees that you should be aware of. For example, banks will charge you if you use your debit card
on an ATM that is not theirs. Also, depending on the type of account you have, you must
maintain a minimum balance of a certain amount to avoid being charged. It's always best to shop
around for the best product that fits your needs.
C. How to Open a Bank Account

 
Once you've found the bank that fits your financial needs, you'll have your new account opened
in no time flat with these five easy steps.

Step 1: Choose a bank and product

You may have already done this. If not, shop around. Just as you should go to more than one
store to find the best deal, the same care should go into choosing a financial institution that fits
your needs.

An easy way to get this done is to look at institutions’ websites.You can also visit several banks
at locations that are convenient for you and compare product offerings.

Note about online bank accounts: An online bank account is an account that is only offered
 online. The major benefit is that online accounts generally have higher yields or Annual
Percentage Yield (APY) than traditional accounts. This allows you to earn more with the same
amount of deposited money. But ask these questions before you sign up:

 Will you have easy access to your money?

 Can you link the online account to other accounts from other institutions?
 Can you pay bills and make other transactions with this account?
 How good is the customer service?
 Lastly, just because you apply for an account online, doesn't mean you have an online bank
account.

Step 2: Complete an application form

In order to open an account, you must complete a short application and provide basic
information to the bank for regulation reasons. Banks will ask for details like your name,
address, birthday, and at least one form of government-issued ID (a passport or driver’s
license). Banks now allow customers to open bank accounts online, as well as, in person.

If you’re doing this online, you may just need to type the information into a text box. If you open
bank accounts in person you can hand your IDs over to the banker who will probably make
photocopies.

You’ll also have to agree to abide by certain rules and accept responsibility for certain actions. If
you open bank accounts online, you complete this step by clicking an “I Agree” (or similar)
button, and performing the next step.

Step 3: Print, Sign, and Mail (applicable if opening a bank account online)

If you open bank accounts in person, this step does not apply. Go to Step 4. 

If you are opening an account online, you’ll probably have to print, sign, and mail a document to
the bank before the account is opened. Some banks may use electronic disclosure and consent
that is legally binding, but many still won’t open bank accounts unless you complete this step.
Until they receive the documents, your account is not active.

Step 4: Make a deposit

Depending on the type of account, the bank will ask you to make a minimum deposit. However,
if it's a "free" checking account, the amount you deposit is up to you.

Step 5:  Receive the welcome package

It takes anywhere between a few days to a couple of weeks for the bank to process your
paperwork. Then, they will mail you everything you need for the account, such as a
complimentary set of checkbooks, debit cards, and Personal Identification Number (PIN) which
you can change at a branch office.

D. Credit and Debt Management

 
Balancing your credit and debt is an important building block to good financial health. Credit
follows you everywhere you go, affects how much access you have to money, and can even
influence employment opportunities.

What is Credit?
Credit is the confidence in a borrower's ability and intention to repay. People use credit to
borrow money so they can obtain loans for a home, a car, college education, and other things
they may not be able to afford upfront.

How much confidence lenders have in you as a borrower depends on many factors. Your
income is an indicator of your ability to repay, particularly when compared to the amount of debt
you may already have. Another factor is the amount of borrowing you have already done and
how well you repaid. Keeping your debt low and making payments on-time and regularly will
help to improve your credit.
The credit a person has typically determines how much they will be allowed to borrow, for what
purpose, for how long, and at what interest rates.
 
Practice Activity no. 1
1. How do you and lenders know if you have good or bad credit?  

2. Explain the importance of opening a bank account .

Chapter 5- Insurance
A. Financial concepts
A risk is something that exposes us to danger, harm, or loss. We face risks every day,
and often these risks can have a financial impact on our lives. Getting sick, breaking a leg,
having a car accident, or experiencing a house fire are examples of risks that may happen to
any of us. If we had to pay the full costs for doctor’s visits, surgeries, and automobile repairs
ourselves, it could cause a substantial financial burden in our lives. To protect against the
financial consequences associated with these risks, people often choose or are required to
purchase insurance policies. Insurance policies reduce a person’s financial risk in areas such as
health (medical insurance), eyesight (vision insurance), automobiles (auto insurance), property
(homeowner’s or renter’s insurance), and death (life insurance). Consumers pay a fee for these
policies, called a premium, which is typically much less than the costs associated with this risk
without insurance. The consumer who buys the insurance policy is called a policyholder. The
policyholder might pay the premium all at once or through a payment plan that divides the total
cost into payments that are made monthly, quarterly, or some other agreed payment schedule.
B. Key vocabulary
° Insurance: The practice or arrangement in which a company or government agency provides
a guarantee of compensation for specified loss, damage, illness, or death in return for payment
of a premium.
° Insured: The person, group, or organization whose life or property is covered by an insurance
policy.
° Insurer: A person or company offering insurance policies in return for premiums; person or
organization that insures.
° Policy: In the insurance context, it is a written contract between the insured and the insurer.
° Policyholder: The individual or firm that acquires and wants protection from the risk and
generally in whose name an insurance policy is written. The holder is not necessarily the
insured. For instance, life insurance policies might be bought by employers of key employees,
or a husband might buy and be the holder of a life insurance policy on his wife. In such cases,
the buyer is the policyholder.
° Premium: The amount of money that has to be paid for an insurance policy.
° Risk: Exposure to danger, harm, or loss

C. Types of insurance
This handout describes some common types of insurance. It does not, however, list every type
of insurance that may be available.
Agricultural Provides farmers with financial protection against
production losses caused by natural perils such as
drought, excessive moisture, hail, frost, wind, and wildlife.
Also called crop insurance.
Auto Protects a person against financial loss in the event of an
auto accident, damage to a vehicle, or theft.
Business Protects a company’s financial assets, intellectual
property, physical property from a covered loss due to
risks such as lawsuits, property damage, theft, vandalism,
loss of income, or employee injuries or illnesses.
Cell phone Covers theft, loss, and accidental damage of your cell
phone.
Dental Covers the cost of dental expenses related to the teeth
and gums.
Disability Pays some or all of a worker’s salary if they become
disabled and are unable to work at their job; either short-
term or long-term.
Earthquake Covers damage to your property caused by an
 earthquake.
Flood Covers damage to your property due to flooding.
Health Covers the cost of medical expenses due to illness,
injuries, and health conditions.
Homeowner’s Covers a home’s structure and the personal belongings
inside in the event of loss or theft; helps pay for repairs
and replacement.
Liability Protects an individual or business if they experience
claims resulting from injuries and damage to people
and/or property.
Life Pays an agreed upon sum of money to a beneficiary
when the insured person dies (or pays this amount after a
set period of time).
Renter’s Covers the cost of replacing personal belongings that are
stolen, damaged, or ruined in a home that is being
rented.
Vision Covers expenses related to vision care such as exams,
glasses, and eye injury.

Practice Activity no. 1

1. Which types of insurance will I most likely purchase in my lifetime?

2. Without insurance, what financial risks might I face?

Practice Activity no. 2

Instructions
1. Review the “Types of insurance” handout.
2. For each type of insurance, identify who or what is being insured (property or person).
3. Estimate how important each type might be when you’re an adult living on your own. Explain your
thinking.
4. Choose the three types of insurance you think would be most important when you’re an adult and
explain why you chose those types.
 Learning Activity no. 3
Direction: In the space below, list the three types of insurance you think would be most
important to your financial well-being as an adult and describe why.

Type of Insurance Why it would be one of the most important

types
 Reference/s
https://study.com/academy/lesson/the-difference-between-wants-vs-needs-in-economics.html
https://fee.org/articles/demand-and-supply/
https://corporatefinanceinstitute.com/resources/knowledge/economics/economic-system/
https://www.lucidchart.com/blog/consumer-decision-making-process
http://freeuniversitybd.weebly.com/uploads/4/7/0/6/47064417/
y_chapter_1_intro_to_consumer_behaviour_ahmad_yamin.pdf
http://accountax.us/Secondary%20Education%20Economics%20Chapter%203%20Consumer
%20Protection.pdf
https://www.consumerfinance.gov/consumer-tools/educator-tools/youth-financial-education/teach/
activities/exploring-types-insurance/
https://files.consumerfinance.gov/f/documents/cfpb_building_block_activities_types-of-
insurance_handout.pdf
https://files.consumerfinance.gov/f/documents/cfpb_building_block_activities_exploring-types-of-
insurance_worksheet.pdf
https://files.consumerfinance.gov/f/documents/cfpb_building_block_activities_exploring-types-of-
insurance_guide.pdf
https://consumer.westchestergov.com/money-management/develop-a-budget