Economics - Headway: Scarcity, choice, and decision making.

Scarcity, choice, and decision making.

Standard 3 - Because of scarcity, individuals, organizations and governments must evaluate trade-offs, make choices, and incur costs.

Benchmark - 9.2.3.3.1 - Identify the incentives and trade-offs related to a choice made by an individual, household, organization and/or government; describe the opportunity cost of a choice; and analyze the consequences of choice(both intended and unintended).

Last year, Jim Cornelius (Corny to his friends) graduated from a two-year technical training school and got a job as a lathe operator at a nearby manufacturing plant. His salary is now $1,700 per month. He expects to get very small wage increases during the next year or two, but he hopes to be promoted to line inspector in about three years, which will increase his salary by $200 a month.

Corny is sharing an apartment with a high school friend who also works at the plant. They are each spending $365 a month for a two-bedroom apartment and utilities, including local telephone service and cable TV. Corny would like to live alone in a one-bedroom apartment, but he figures that would cost about $560 a month (including utilities).

Corny has a two-year-old compact car on which he owes about $3,000. His monthly car payment is $190. He wants to buy a new car as soon as the one he has now is paid for, and he expects his car payments will be quite a bit higher.

Corny loves to listen to music, and his stereo system is a few years old. He wants to buy a new one. He has saved $300 over the past three months, but he figures that the system he wants will cost a least $1,000. He has good credit, and his credit card has a zero balance. He could charge up to $1,500, but he hates to add to his monthly payments.

Look at Corny's monthly budget in the table below. What changes do you think he should make in his monthly spending? If you were earning Corny's salary of $1,700 per month, how would you divide it up among these categories or for other things you want?

Budget Category	Corny	YOU
Soc.Security tax	$130	?
Income tax	$200	?
Housing	$365	?
Food groceries	$220	?
Food eating out	$75	?
Clothing	$75	?
Car payment	$190	?
gas, oil, wash	$80	?
Car insurance	$85	?
repairs	$30	?
Medical copays and Deductibles	25	?

EXTRAS

Entertainment - movies, hanging out, snacks, beverages 75

Health Club 15

Bowling 25

CDs 30

Newspaper, books, magazines 15

Gifts, birthdays, Mother's Day etc. 20

Savings (for stereo) 100

Miscellaneous (haircuts, toiletries, laundry, etc.) 30

Questions:

1. What changes do you think he should make in his monthly spending?

2. Do you think these prices are higher or lower than you would find today? Why?

3. If you were earning Corny's salary of $1,700 per month, how would you divide it up among these categories or for other things you want?

Come up with a realistic budget that you could live with at $1,700.00 per month.

4. What type of a job can you get for $1,700.00/month this year? Use the internet to find job salaries.

5. What type of income do you think you will have in ten years from now? Look up what the average salary in your hopeful career is. How can you achieve this salary? (Education, location,etc.)