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Ch. 10 Economics: Close to Home

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Ch. 10 Economics: Close to Home

If I had a million dollars

- Write down what you would do with a million dollars – top 3
- Read pp. 140 – 143
- Answer: 1) What is economics? 2) What is scarcity? 3) What is opportunity cost?
- Complete: #1 a, b, c p.143, #3 p. 143
- The Nature of Economics

- Read pp. 144 – 145
- Answer: At an auction, what happens to the number of bidders as the price rises?
- Table 10.1 – on a line graph, plot a demand curve and a supply curve from the data shown. What can you tell about your market from the point at which the two lines intersect?

- Read pp. 146 – 147
- Answer # 1a, b,
- Write up a quick budget for yourself. What have you bought in the last two weeks, and where did you get the money? How did you decide what to spend the money on?

- Read 150 – 151
- It’s a matter of interest: Which option? It depends on the month.
- In a 31 day month option 2 wins
- Option 1: $7.75 million ($250,000.00 X 31)
- Option 2: $10.74 million (.01X.01=.02X.02=.04, etc.

- In a 30 day month option 1 wins
- Option 1: $7.5 million
- Option 2: $5.37 million (the doubling to $10.74 million would not be in effect in a 30 day month)

- Principal – sum of money invested or borrowed, not including additional interest payments
- Interest – money paid for the use of money lent
- Rate of interest – amount of interest paid on the principal expressed as a %

- Compound interest – interest added to the original invested or borrowed sum, so that further interest is calculated on the original amount, plus interest already earned.

- The “rule of 72” is shown on fig. 10.10. Using this rule you can calculate how long it will take a saved or invested sum of money to double at various interest rates by dividing the number 72 by the interest rate. Calculate how long it would take the sum of $500.00 to double at the interest rate of 18%.

- The answer is 4 years.
- 1) If Simion had $300.00, how many years would it take for it to become $600.00 at 5% interest?
- 2) Elise was given $200.00 for a grad gift. How long will it take to become $400.00 at an interest rate of 13%?

- Answers:
- 1) 72 / 5 = 14.4 years
- 2) 72 / 13 = 5.5 years
- Always divide 72 by the rate of interest. “Rule of 72”

- Planning the prom activity:
- Your task is to reach a decision about how the funds should be used for the dance. Prepare an answer for the discussion question.
- Consider what you want for the dance, but acknowledge what you are giving up for that decision

- You have just come to realize a fellow student has been diagnosed with a major illness. Will this change your decision? What other issues will influence your decision?

- Hidden Market Activity
- Preface: Explore the power of inventiveness and advertising. A lot of companies promote products by persuasive advertising techniques that clearly appeal to wants rather than needs.
- Procedure: 1) students will divide into 5 groups
- 2) Each group will be given a bag of identical materials
- 3) Your group will have 20 min. to assess your materials, and create a gizmo for the public. (Something of your own design and its use is decided by you. It may not be needed, but it’s your job to make the public want it. Create fad frenzy!)
- 4) Your group now has 8 min. to invent an ad campaign. The ad can be a poster, a jingle to promote the product, a commercial the group will act out, or anything that will create a buzz and people will want the product.
- 5) Each group will present their ad to the class. The winner is decided by which product the majority of the class will buy.

- Financial Fable pp. 152 – 154
- In this story, Marie demonstrates the importance for producers to know the relationship between supply and demand.
- How does Marie determine that there is a demand for recycled toys?
- Where does Marie find a supply source for recycled toys?

- What type of work does Marie have to provide before the recycled toys are ready to sell? How does this improve the value of her product?
- What does Mr. Russell mean when he says, “get interest working for you instead of working against you and you’ll prosper?”

- Know the following terms for your quiz:
- Scarcity, supply, opportunity cost, demand, interest, hidden market, rate of interest, principal, consumers, substitution effect, economics, compound interest, producers