1. Economics Making decisions

2. Definition of Economics Economics is the study of how we make decisions in a world where resources are limited. – Do we make decisions daily? – Why do we have to make a choice? – Why can we not just have it all? – Why can I not buy the nice car and the nice house?

3. The Problem of Scarcity Scarcity-not enough resources to produce all the things we would like to have.

4. Scarcity effects us all Individuals – Not enough money to buy the nice house and the nice vehicle? Decision needs to be made. – Not enough time to spend with your boyfriend and your friends? Decision has to be made. Societies – Not enough resources to produce cars, gasoline, or food. Decision has to be made.

5. Scarcity leads to economics Unlimited Wants + Limited resources = SCARCITY CHOICES

6. Choices Trade-Offs-what you sacrifice to get something Opportunity Cost-what you could have done with what you sacrificed – opportunity lost

7. Scarcity leads to economics Unlimited Wants + Limited resources = SCARCITY CHOICES Opportunity Cost/Trade-Offs

8. Three basic questions all individuals and societies face. What to produce? – Society Guns? or Butter? – Individual Car? or House? How to produce? – Society By polluting the air? Or Not? – Individual By being a Teacher? Or Carpenter? For whom to produce? – Society For the rich? Or the Poor? – Individual For my Family? Or For the public?

9. How would ones education, income, career, and life choices impact an individual’s money plan and goals?

10. Charting Choices Economic Models

11. PPF Production Possibilities Frontier Economic Model-simplified representation of the real world used to explain and predict outcomes of decisions made.

12. Factors effecting Production Possibilities Increase in resources shifts the curve to the Right Decrease in resources shifts the curve to the left. – Governments could Raise taxes – Individuals Earn more money, win the lottery

13. Measuring Efficiency and Productivity and Possibilities Creating a Budget

14. Tools Cost or Expenditures – Money spent

15. Two Types of Cost Fixed cost that will not change no matter how little or much you produce – Business - Property tax – Individual - Mortgage

16. Variable Cost Cost that “vary” or change with the amount you produce – Business - Raw materials – Personal – Entertainment

17. Assessment of cost Total Cost (expenditures) is – Variable + Fixed = Total Average total cost is the amount it cost to produce one unit of a product or a monthly payment

18. Marginal Cost (means extra or additional) is the extra benefit you receive from producing one more unit of a product

19. Managing Your Money Budgets & Savings and Checking Accounts

20. Budget Steps 1.Make a list of everything you spend fixed and variable cost for a period of time (monthly). 2.Same period of time what your earn. 3.Analyze your budget. 4.Adjust to reach a “surplus” 5.Monitor spending and adjust for changes

21. Checking Account

22. Checking Deposits Withdrawal

24. Checking Deposits Withdrawal Electronic banking – Debit cards – Automated transactions What if you do not have enough money in your checking to cover a purchase?

25. Savings Account Primary Deposit Account – Transfer money from savings to checking to cover a purchase

26. Fees and Benefits Bank charges for managing your money Send reports of all transactions Help protect your accounts from: – Identity theft – Personal info disclosure Pay interest on savings

27. Credit Lender Borrower Interest- percentage owed to lender on amount borrowed APR (annual percentage rate) Credit rating Collateral – property pledged as security for a loan.

28. Sources of Credit Credit Cards – Loans with interest – Example : $2000.00 purchase becomes $3142.00 purchase if the minimum payment is made.

29. Credit Card Education Know what the interest rate is. Know the penalties for late payments. Payoff debt at end of month Get low balance card

30. Paper or Plastic Only 30% of payments were made with cash Debit Cards – 20% of all purchases – Automatic deduction from checking

31. Investment Stocks – partial ownership of a company – Return – profit earned on investment – Dividends – payments from stocks Bonds – lending money to government or company to receive interest Mutual finds – pools of peoples money

32. Track Investments Stock Markets – NYSE – NASDAQ – SP 500 – DJIA

33. Other ways to Invest Retirement funds – 401 K Provided by employers You put in a dollar they put in 50 cent or $1 – IRA – Individual Retirement Account Between you and the government Get tax deductions (just like contributions)

34. Keys to Investment Start Early Diversify – Don’t put all your eggs in one basket Hire and accountant

35. Summary of Personal Finance Realize Scarcity Maximize your resources Create a Budget Manage money through a bank Invest in the future Diversify investments

36. Explain how fiscally (money matters) responsible individuals, 1create and manage a personal budget that is inclusive of income, taxes, gross and net pay, giving, fixed and variable expenses; 2manage a checking and savings account and 3save and invest, by diversifying, to meet financial goals.