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Analyzing Opportunity Costs and Economic Decisions in Family Financial Situations

This course outline examines the economic problem through the lenses of two individuals: Narita, a single mother managing a tight budget, and Samual, a university graduate with a different financial scenario. Participants will explore the concepts of opportunity cost, rational decision-making, and the impact of economic conditions on personal finance. Key questions will guide discussions on financial choices, disposable income management, and the distinct factors affecting Narita and Samual's circumstances, ultimately fostering a deeper understanding of individual financial strategies.

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Analyzing Opportunity Costs and Economic Decisions in Family Financial Situations

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Presentation Transcript

  1. 3 Feb 2009 • Wiki • Course Outline & Syllabus • Review the Economic Problem • Examine the ways that the economic problem affects individuals • Interest rates smh.com.au • Delicious

  2. Narita • You are a single mother of 3 children • You work full time • Two of your children are at school • The other is in child care • You childcare for OOSH care is $310 per week • Your pre-school fees are $325 • You spend $40 on public transport per week • Your take home (after tax) income is $1000 • If you didn’t work, you are entitled to $450 per week in social security and childcare rebates of $250

  3. Narita: Questions • What is the opportunity cost of working full time? (think laterally here ladies) • Could you make a rational decision to improve your circumstances?

  4. Narita – Questions (B) Your income is $425 • Rent $225 • Food $200 • Travel $40 • Entertainment $100 • Clothes $100 • Saving $20 • What would you decide to purchase with your disposable income? • What is the opportunity cost of your decision?

  5. Samual • You are a uni graduate earning $700 per week after tax • You spend $50 on public transport per week • You live with your parents • You would like to purchase a property in the future

  6. Samual: Questions • What is the opportunity cost of working full time? (think laterally here ladies) • Could you make a rational decision to improve your circumstances?

  7. Samual – Questions (B) Your income is $700 • Rent $0 • Food $200 • Travel $50 • Entertainment $200 • Clothes $100 • Saving $150 • What would you decide to purchase with your disposable income? • What is the opportunity cost of your decision?

  8. Comparison • How does the economic problem impact Narita? • How does the economic problem impact Samual? • What is the difference between Samual and Narita’s income? • Which position would you prefer to be in? Why? • If Samual earns less than Narita, why is the opportunity cost of satisfying her needs greater than Samual’s? (think about this in terms of the balance between wants and resources)

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