Chapter 8-Consumer Purchasing Strategies and Legal Protection

What is unit pricing?

the use of standard unit of measurement to compare the prices of packages of different sizes

How to compute unit price of an item

unit price /# of units

What is impulse buying?

unplanned buying behavior resulting from a powerful urge to buy something immediately

When might leasing a motor vehicle be appropriate?

business use changing vehicle every few years

A food package with 32 ounces costs $1.76. What is the unit cost of the package?

1.76 / 32 = 5.5 cents an ounce

An item was bought on credit with a $60 down payment and monthly payments of $70 for 36 months What was the total cost of the item?

36 x 70 = $2,520 + 60 = $2,580

An online buying club offers a membership for $300, for which you will receive a 10 percent discount on all brand-name items you purchase. How much would you have to buy to cover the cost of the membership?

$3,000 = 300 ÷ 10%

A work-at-home opportunity is available in which you will receive 3 percent of the sales for customers you refer to the company. The cost of your "franchise fee" is $600. How much would your customers have to buy to cover the cost of this fee?

$600 ÷ 3% = $20,000

What would be the net present value of a microwave oven that costs $159 and will save your $68 a year in time and food away from home? Assume an average return on your savings of 4 percent for five years. (Hint: Calculate the present value of the annual savings, then subtract the cost of the microwave.)

$68 x 4.452 (PV 4% for 5 yrs) = $302.74 - $159.00 = $143.74

A service contract of a video projection system costs $70 a year. You expect to use the system for five years. Instead of buying the service contract What would be the future value of these annual amounts after five years if you earn 3 percent on your savings?

$70 x 5.309 (FV 3% for 5 yrs) = $371.63

John Walters is comparing the cost of credit to the cash price of an item. If John makes an $80 down payment and pays $35 a month for 24 months, How much more will that amount be than the cash price of $685?

80 + (35 x 24= 840) = $920 - $685 = $235.00

A consumer wants to settle a dispute out of court with the use of a legally binding third-party. What legal action would be the most appropriate to take?

Arbitration

How does arbitration differ from mediation?

Arbitration (legally binding) is the settlement of a difference by a 3rd party whose decision is legally binding Mediation (non-binding) involves a 3rd party to settle grievances

Based on the following data, prepare a financial comparison of buying and leasing a motor vehicle with a $24,000 cash price Buy Down payment (to finance vehicle), $4,000Monthly loan payment, $560Length of loan, 48 months Value of the vehicle at the end of loan $7200 Lease:Down payment for lease, $1,200Monthly lease payment $440Length of lease, 48 months End-of-lease charges, $600

Buy:$4,000 + ($560 x 48 = 26,880) - $7,200 = $23,680 Lease:$1,200 + ($440 x 48 = 21,120) + 600 = $22,920

A group of telephone customers was overcharged by $1.10 a month over the past 22 months. What legal action would be the most appropriate to take?

Class-action suit

In what situation can comparing prices help in purchasing decisions?

Comparing unit pricing, coupons, and rebates, as well as evaluating benefits using the time value of money

What factors commonly influence a person's daily buying choices?

Economic, social, personal

A low-income person wants to obtain the services of a lawyer to file a product-liability suit. What legal action would be the most appropriate to take?

Legal aid society

define: legal aid society

One of a network of publicly supported community law offices that provide legal assistance to consumers who cannot afford their own attorney

A person is attempting to obtain a $150 catering deposit that was never returned. What legal action would be the most appropriate to take?

Small claims court

In what types of situations would small claims court and class action suits be helpful?

Small claims court settle minor disagreements filing claims involving amounts below a set dollar limit maximum varies $500-$5,000 limits between $,5000-$10,000 Class action suits number of people with the same complaint defective products, customers who were overcharged by the utility company, or travelers who were cheated by a tour business

What is a warranty?

a written guarantee from the manufacturer or distributor of a product that specifies the conditions under which the product can be returned, replaced, or repaired

What rights to purchasers of products have even if no written warranty exist?

also known as an implied warranty. Implied warranty of title- the seller has the right to sell the product Implied warranty of merchantability-guarantees the product is fit for the ordinary uses for which it is intended

Based on the data provided here, calculate the items requested: Annual depreciation, $2500 $650current year's loan interest, $680 insurance $3.50Averagae gasoline/per gallon $3.50 per gallon Parking/tolls, $420Annual mileage- 13,200Miles per gallon, 24 License and registration fees, $65Oil changes/ repairs, $370

The operating cost per mile 6,610.00 ÷ 13,200 = .501 cents per mile

Based on financial and opportunity costs, which of the following do you believe would be the wiser purchase? Vehicle 1: A three-year-old car with 45,000 miles costing $16,700 requiring $1,385 of immediate repairs Vehicle 2: A five-year-old car with 62,000 miles, costing $14,500 requiring $1,760 of immediate repairs.

Vehicle 1: Younger car, less mileage, more money down Vehicle2: Older car, more mileage, less money down

What is cooperative?

a business organization owned and operated by a group of individuals for their mutual benefit

What is a rebate?

a partial refund of the original price of the product

What are the common causes of consumer problems and complaints?

defective products, low quality, short product lives, unexpected costs, deceptive pricing, and poor repairs

What maintenance activities could increase the life of your vehicle?

get regular oil changes (every 3,000-5,000 mi.) check fluids (brake, power steering, transmission) inspect hoses and belts for wear get a tune-up (new spark plugs, fuel filter, and air filter) check cable and clean battery cables and terminals check spark plug wires ever 50,000 mi. flush radiator and service transmission every 25,000 mi. keep lights, turn signals, and horn working condition check muffler and exhaust pipe check tires for wear, rotate tires every 7,500 mi. check the condition of the brakes

How can most consumer complaints be resolved?

going back to original sales location and speaking with store manager

What is open dating?

information about freshness or shelf life found on a package of a perishable product

What types of brands are commonly available to consumers?

national-brand products highly advertised store-brand (private label) low-cost alternative

What are the major sources of consumer information?

personal contacts-family and friends provide info about products performance, brand quality, and prices business organizations-offers product labels, and packaging with basic facts about pricing, ingredients, quality, and availability media sources-offers purchase location, availability of prices, shopping suggestions, and product reviews independent testing organizations-reports the quality of products and services government agencies-provide info sources, complaints hotlines, and educational programs

What actions are appropriate when buying a used car?

pre-shopping activities include: problem identification, info gathering evaluating alternatives include: selecting car options, comparing used vs leasing determining the purchase price include: used car negotiations, price bargaining for new cars post-purchase activities include: auto operation cost, car maintenance

How are daily buying decisions related to overall financial planning?

using wise purchase strategies such as comparison shopping, the timing of purchases, location of purchase, brand comparison, reading label information, price comparison, and warranties

How does a service contract differ from a warranty?

warranties are written guarantee from the manufacturer or distributor that specifies the conditions under which the product can be returned, replaced, or repaired service contracts agreement between the business and a consumer to cover the repair cost of the products

Describe some situations in which you might use the services of a lawyer.

writing a will making real estate purchases suing for injury damages caused by product