Law of Demand

Law of Supply

1) As the price of a good increases, the demand decreases. 

2) As the price of a good increases, the quantity supplied increases. 

1. Imperfect Competition : monopolies
2. Price Discrimination: based on race, gender, age
3. Imperfect information: the seller knows more then the buyer
4. Inequality

• mkts have grown large and more specialized
• difficult for consumers to get honest information
• consumers are seperated from sellers logistically and sometimes ethically. 

• govt agencies
• consumer groups
• industry self-regulation

• federal and state statutes and regulations that promote product safety and prohibit abusive, unfair, and deceptive practices. 

Regulation

Deregulation

Regulation: an attempt by the govt to control the mktplace

Deregulation: removes or reduces the govt intervention. This is so the competition in any industry will drive down prices and create a more efficient market

ex: In CA, deregulated the electric utility industry to hopefully create competition and drive down prices, but what happened instead was that heat waves generated huge demands for electricity and companies responded by increasing residents bills by 200%

• An act for preventing the manufacture, sale, or transportation of adulterated or misbranded or poisinous foods, drugs, medicines, liqours, and for regulating traffic therein and for other purposes. 

• FDR signed the bill on 6/25/1938
•  is a set of laws passed byCongress in 1938 giving authority to the U.S. Food and Drug Administration (FDA) to oversee the safety of food, drugs, and cosmetics.
• It replaced the earlierPure Food and Drug Act of 1906.
• Elixir sulfanilamide was an improperly prepared sulfanilamide medicine that caused mass poisoning in the United States in 1937. It caused the deaths of more than 100 people. The public outcry caused by this incident and other similar disasters led to the passing of the 1938Federal Food, Drug, and Cosmetic Act.
• Aside from the Pure Food and Drug Act of 1906 and the Harrison Act of 1914 banning the sale of some narcotic drugs, there was no federal regulatory control ensuring the safety of new drugs until Congress enacted the 1938 Food, Drug, and Cosmetic Act in response to the elixir sulfanilamide poisoning crisis.

• FDA
• Consumer Product Safety Commission
• Federal Communications Commission
• Federal Trade Commission
• Federal Consumer information center
• Securities and Exchange Commission
• Environmental Protection Agency

• See that foods, drugs, and cosmetics are safe for consumers
• estb. in 1906 by the Food and Drug Act
• it is the oldest consumer protection agency in the nation
• cant claim to cure if it doesnt
• amendments: 1) 1938 drugs must be approved before, 2) modern movement--drugs must be effective

Consumer Product Safety Commission (CPSC)

• headquarted in Bethesda, Maryland 
• created in 1972 by congress under the Consumer Product Safety Act and began operating in 1973
• function is to protect consumers against injuries and deaths associated with consumer products such as toys, spots equipment, household equipment and products such as lawn mowers and coffeemakers. 

• an independent US govt agency directly responsible to Congress
• estv by the Communications Act of 1934 and is charged with regulating interstate and international communications by radio, tv, wire, satellite, and cable

• created in 1914
• purpose is to prevent unfair methods of competition in commerce
• amendments: 
• 1938: included unfair or deceptive practices, advertising
• 1975: Magnuson-Moss Warranty Act-- requires manufacturers and sellers of consumer products to provide consumers with detailed info about warrant coverage. 

• estb. in 1934
• under the jurisdiction of the FTC
• protects investors and maintains integrity of the securities mkt 
• watches for fraud and deception 
• requires companies to disclose info
• made up of 5 commissioners appointed by the president. 

• mission is to protect the human health and the environment
• estb. in 1970
• led by the administrator, who is appointed by the president of the US

• began in 1862 under Ab Lincoln
• back then 48% of people were farmers who needed good seeds and info to grow crops
• today, less then 2% of people live on farms so the USDA reaches out and broadened its info to include all segments of the population
• responsible for the safety of meat, poultry and egg products

• estb. in 1862
• works with the FTC in enforcing the Sherman Anti-trust law
• which approves mergers, stops price fixing, and stops monopolies

• mergers are when 2 or more companies combine into single company p.142
• horizontal merger
• vertical merger
• market extension merger
• product extension merger

• some consumer protection efforts are hindered when politicians or regulators are influenced by special interest groups
• what are special interest groups? Those determined to encourage or prevent changes in public policy w/o trying to be elected. 

• 1993: FDA wanted to add regulations
• Health food stores lobbied congress
• 1994: passed dietary an supplement and Health education act, when exempted dietary supplements from most regulation

• enlightened companies and consumer protection
• ex: Society of Consumer Affairs Professionals International (SOCAP) which is an organization of people who work in business in the area of consumer affairs and customer services. 
• SOCAP began in 1974. members are often the conusmers voice within a company.
• consumer publications
• ex: Consumers Union: which is a private organization which does product testing and published consumer reports
• ex: National Consumers League is the oldest consumer organization in the US and works to provide info to consumers
• ex: Consumer Federation of America is a large national advocacy organizaiton and is often the voice of consumers in the media

• consumers may not want protection
• ex: sister wives (under investigation but is this the govt business?)
• false sense of security
• ex)for the most part products are relatively safe so consumers expect that all products are safe. when people buy meat at kroger they dont inspect it carefully usually like smelling it. could be bad though and the consumer is caught off guard
• costs may be greater than benefits
• ex: grisly discovery of decaying corpses on the grounds of Tri-State crematory led legislators to pass regulations to ensure that consumers never again receive urns filled with powdered cement
• however, under GA's new law, crematories must employ embalmers even though crematories have no need for their services. conusmers will pay higher prices. 
• how safe is safe?
• low labeling
• ex: manufacturers label products in order to avoid paying for consumer dissatisfaction
• ex: if a product says dry clean only and you hand wash it and it shrinks you cannot complain b/c they warned you. 

Horizontal mergers

Vertical mergers

mkt extension merger

product extension merger

conglomerate merger

1. Horizontal merger: combines direct competitiors in the same product lines and mkts. ex: 2 department stores in the same town merging
2. Vertical Merger: combines supplier and company ex: a producer of raw material also manufactures and wholesales the material
3. market extension merger: combines firms selling the same products in different mkts. ex: one grocery store distributor buys another increasing the area to which it distributes
4. product extension merger: combines firms selling different but related products in the same market. ex: when a soft-drink company buys out a snack company thus expanding the product line
5. conglomerate merger: combines with none of the previously mentioned relationships or similarities ex: a beer manufacturer joining with a furniture company

1. Sherman Anti-trust act 1890: maintain a competitive economy
2. Clayton Act 1914: statements about discrimination in price, services or facilities. discusses corporate mergers
3. Wilson Tariff Act: encompasses imports and fairness of trade. 

• provides information to consumers about a wide variety of products
• center also tells consumers whom to contact for help with problems
• located in colorado

• Sunbelt: FL, CA, HI
• tourist areas
• and elderly people

grifter

extortion

someone who uses his position to derive profit or advantages by unscrupulous means

illegal use of position power or knowledge to obtain money, goods, funds, or favors

ex: blackmail

occurs when individuals or groups make consumption choices that have negative consequences or misuse products in such a way as to cause injury to oneself or others. 

ex: 25,000 people die every year due to alcohol related traffic incidents

• turning over some of the functions of govt to business