Topic 6: Understand and work out the true costs of spending

Question 1

What are goods?

Answer 1

Goods are things that we can physically hold.

Question 2

What are services?

Answer 2

Services are items for which we pay that help us.

Question 3

What does value for money mean?

Answer 3

Value for money means that we feel that we have paid a fair price for the product that we have bought. However, value for money does mean different things to different people.

Question 4

Why does value for money mean different things to different people?

Answer 4

Value for money means different things to different people because some people are happy to compromise on quality to get an item more cheaply where as, others prefer to pay more for a better quality product.

Question 5

What do you have to take into consideration when visiting several shops to compare prices?

Answer 5

If you spend money on bus fares or petrol to be able to visit the shops to compare prices, then you have to take this additional cost into account when deciding which is cheapest.

Question 6

What do price comparison websites do?

Answer 6

Price comparison websites take away all of the walking around between ships,because they will collect prices from other websites and let you have a summary of the best ones. They can be used for comparing either goods or services.

Question 7

Name 6 ways of getting things for a lower price:

Answer 7

• discounts
• bulk-buy discounts
• special offers
• collect “money-off” coupons
• loyalty cards
• free gifts

Question 8

What is a discount?

Answer 8

A discount means that the seller takes off a percentage of the price.

Question 9

What is a bulk-buy discount?

Answer 9

A bulk-buy discount means that the product is cheaper if you buy more of it.

Question 10

When might you get a special offer?

Answer 10

A special offer might apply if you buy several items at the same time.

Question 11

What does collecting “money-off” coupons do?

Answer 11

If you collect enough money-off coupons, you can take them to most shops and supermarkets and they will give you a discount.

Question 12

What are loyalty cards?

Answer 12

A lot of stores have their own loyalty cards that give you points on everything you buy. You can then use these points to get discounts off your bill or you can exchange them for free gifts.

Question 13

What are free fits and when do they occur?

Answer 13

A lot of catalogues offer free gifts when you place an order for more than a certain value.

Question 14

Why do you pay extra for a well-known name or brand?

Answer 14

You pay extra for a well-known name or brand because they are a better-known company or might have a reputation for making or selling good-quality items or items that are more desirable.

Question 15

What is opportunity cost?

Answer 15

Sometimes, you have to give up one thing to get another and the opportunity cost is the value of the item given up.

Question 16

What does VAT stand for?

Answer 16

“value added tax”

Question 17

What are the 3 main rates of VAT?

Answer 17

• standard rate (20%)
• reduced rate (5%)
• zero rate (0%)

Question 18

What is standard rate?

Answer 18

Standard rate is the rate on the majority of goods and services that we buy, from clothes, to electrical equipment, to personal services such as hairdressing or plumbing.

Question 19

What is reduced rate?

Answer 19

Reduced rate is the rate charged on domestic fuel.

Question 20

What is zero rate?

Answer 20

Zero rate is the rate charged on a range of products considered to be necessities, such as good, children’s clothes and children’s shoes, books, newspapers and magazine.

Question 21

Why does the government charge VAT?

Answer 21

The government charge VAT to raise money to finance the many public services that it has to provide.

Question 22

What is duty (tax)?

Answer 22

Some items such as petrol, cigarettes and alcohol are subject to another type of government tax called duty.

Question 23

Why does the government charge duty on these items?

Answer 23

The government charges duty on these items to discourage us from buying them, or to make them so expensive that we buy less of them.

Question 24

What does IPT stand for?

Answer 24

“insurance premium tax”

Question 25

What is IPT?

Answer 25

When people buy insurance, they pay a “premium”. This is the amount that they pay to the insurance company to cover the risk of theft, fire, illness, loss luggageetc. The government charges a tax on this premium called IPT.

Question 26

Why do you have to pay customs charge if you buy something from abroad?

Answer 26

You have to pay customers charge because the item has been shipped from the foreign country, so no UK VAT has been added to the price.

Question 27

Why don’t some companies charge postage and packaging?

Answer 27

Some companies don’t charge postage and packaging because this will be their main selling point.

Question 28

What do booking fees pay for?

Answer 28

Booking fees pa for general administration costs, such as issuing and posting out tickets, and the cost of running a computerised system.

Question 29

What is a service charge (in restaurants)?

Answer 29

A service charge is for the benefit of the waiters and waitresses but is sometimes not paid directly to them.

Question 30

If a restaurant decides that is it going to charge for a service, what does it have to do?

Answer 30

If a restaurant decides that it is going to charge for a service, this must be clearly stated before diners get to their table - outside the restaurant or just inside the door - as well as on the menu.

Question 31

What is the main risk of online shopping?

Answer 31

The main risk of online shopping is that you cannot see what it is you are buying before you get it. Therefore, if the item does not fit, or you do not like the colour, or it is bad quality or damaged, you will have to send it back.