IMPACT OF ECONOMICS ON DAILY LIVING
Question 1: Identify a Relevant Economic Concept and Describe How It Applies To the Scenario
The relevant economic concept to my friend’s budget situation is trading off. The concept refers to a situational decision involving loss of quality, quantity or even or asset of one area to gain in other aspects. In my friend’s budget scenario, the total budget remains the same but different things increases while others decrease, which is the pure definition of a trade-off.
Question 2: Summarize the Change in Expenditures between Budgets
The expenditures changes in the budget are noticeable. Rent increase by $750 from $7500 to $8250 while imported food reduced by $500 from $1250 to $7500. Similarly, food from the U.S increased by $500 from $2500 to $3000, utilities reduced by $250 from $750 to $ 500 and transportation reduced likewise by $250 from $750 to $ 500. Savings reduced by $ 250 from $ 7250 to $ 7,000. Therefore, rent is the expenditure that changed the most while by $750 increase while utilities and savings had the least change both by a reduction of $250.
Question 3: Record The Ways In Which Economic Trends Impacted Personal Income And Consumer Prices.
There are three main trends and principles that influence personal income and consumer prices as depicted the hypothetical situation that has led to the need for my friends’ family to change their expenditures. The first principle stipulates that any national standard of living is dependent on the nation’s ability to produce goods and services. The second principle is the rise in prices of commodities as a result of the government printing a lot of money while the third principle is that society’s face a short-run trade-off between employment and inflation. Nations living standards is dependent on its’s ability to produce goods and services. However, the ability to produce goods and services is dependent on the nation’s productivity, and that productivity is a function the illiteracy, knowledge and skill of labour and the labour access to necessary technology and tools. Therefore, when a government prints a lot of money, it leads more cash in circulation; hence a nation faces inflation, and the prices of some essential commodities go up, such as rent. The society then faces a short-run trade-off usually between unemployment and inflation, which is only temporary. Ultimately, policymakers find means of exploiting this relationship by the use of an array of policy instruments leading to price changes and ultimately trade-offs.
Question 4: Explain the Rationale for Budget Decisions Made In Response to Economic Changes
The budget decisions made have some rationale behind them. For instance, my friend decides to buy less imported goods and more domestic goods since the currency has lost value due to more money in circulation and importing goods is now expensive since it will be competing with other currencies as compared to purchasing locally where goods are favourable but still high as a result of inflation. The friend has also reduced the use of utilities as well as cut the savings depicting the standard of living has increased while income has remained constant. Also, there are non-changes in education and family care the government guarantees them. More health care cannot be provided since if the government-mandated increased spending on healthcare, the economy of the country would be less efficient since it would provide individuals with more healthcare than the individuals would choose to pay for. It is worth noting that the friend decided to reduce savings since the income has not increased, the long term effect is that when people save less they are prioritizing spending and they get low incomes at the cost of purchasing more goods. In the long run, the real value of the savings will decline.
Question 5: Explain An Additional Economic Trend Or Change From Within The Last Year And How It Has Impacted Your Personal Life And Finances.
It is conventional wisdom that the income in the U.S has been roughly doubling every 35 years. The trend has impacted my personal life in that we have better standards of living compared to both the generations of my parents and grandparents. The trend has been attributed to increased productivity, especially during the last year, and an hour work currently manages to produce more commodities as well as services than it used to. It has positively impacted my finances since income has risen over time, and so has my standard of living.