Assignment 1: Impact of Economics on Daily Living

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Scenario Some friends who know that you are learning problem solving skills and economics have come to you for advice. They have brought with them their family budget from last year (Budget 1) and t... heir current budget for this year (Budget 2). Budget 1 on the left shows how their family used to spend their income of $25,000. At the beginning of this year, they found that rent and the price of imported food have risen, and the price of food from the United States has dropped. They had no change in income, and they changed their purchases to those in Budget 2 on the right. Your friends' family is unhappy that they are buying less of their favorite imported foods, keeping the apartment colder in the winter and warmer in the summer, and walking more instead of taking taxis or using ride sharing services. They are also unhappy about saving less. Your friends know that you are studying personal finance and have asked you how to explain to their family what has happened to their spending. Help your friends create a way to explain the economic and budget situation to their family. Additionally, think about what economic trends and changes mean to your own personal life and finances. Questions 1. In the first four weeks of this class, you have learned about economic concepts such as supply and demand, scarcity, tradeoff decisions, international trade, opportunity cost, and compound growth. Choose one economic concept from thislist and explain how it isrelevant to your friends' budget situation. The one economic concept from the list that would be most related to my friend’s budget situation would be decisions. There are several items that have a change in cost which is causing my friends budget and spending in other places of need. In simple terms a tradeoff is where on thing increases and another must degrease. 3 ECO110 2. How did expenditures change between budgets? Which expenditures changed the most? Which expenditures changed the least? Which stayed the same? By lowering spending on less important items, they can change expenditures between budgets and focus on important items like rent. Rent was the biggest change in expenditures, increasing by $750. Utilities and transportation decreased the least, decreasing by approximately $250 which could lead to less public transportation and walking more as well working with the utility company on a set budget monthly but has led to keeping the apartment cooler at times in the winter and warmer in the in the summer time. Additionally, education and family care did not change at all. 3. What were the economic trends that created the need for your friends' family to change their expenditures? What can you infer about the connection between prices and expenditures, based on the economic concepts you have learned? [Show More]

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