Consumer Economics Flashcards

What does 'inflation' mean for consumers?

Answer: A general rise in prices over time, meaning each dollar buys less than before

Inflation erodes purchasing power — the same amount of money buys fewer goods and services as prices rise over time.

What is a 'predatory loan' or 'predatory lending' practice?

Answer: Loans with unfair terms (extremely high interest or fees) that trap borrowers in debt — often targeting vulnerable populations

Predatory lenders use deceptive practices and extremely high rates — common in payday loans and subprime mortgages — to profit from borrowers' financial desperation.

What is a 'co-signer' on a loan, and what responsibility do they assume?

Answer: Someone who agrees to repay the loan if the primary borrower defaults, sharing full legal responsibility for the debt

A co-signer is equally responsible for the debt — if the borrower misses payments, the co-signer's credit is damaged and they must repay.

What does it mean when a store advertises a 'loss leader'?

Answer: A product sold at or below cost to attract customers who will also buy higher-margin items

A loss leader is deliberately priced very low (even at a loss) to draw shoppers into a store where they'll also buy full-price items.

What is the main benefit of paying more than the minimum monthly payment on a credit card?

Answer: You pay off the debt faster and pay significantly less total interest over time.

Minimum payments mostly cover interest, barely reducing the principal. Paying more reduces the balance faster and dramatically lowers total interest paid.

Which of the following best describes 'unit pricing' as a consumer tool?

Answer: Showing the cost per ounce, pound, or other standard unit to allow fair comparison between different package sizes

Unit pricing ($/oz, $/lb) lets shoppers compare the true cost of differently sized packages to find the best value.