Economics

The Practical Applications of Economics This guide explains how we can apply economics to our daily life. Economics deals with decision making, everything you do like how you will spend your money wisely, how you will budget your time, and how you react in every issues that involves your everyday life. This guide gives us many tips on how to approach and resolves problems in everyday life from buying a house to making a career choice. It even explains whether or not we should be playing the lottery or not, as well as avoiding “get rich” schemes that we might be approached with. This guide also helps become more realistic on making a career decision and gives us information on the option of becoming an economist. Paying Rent: Is it Throwing Good Money Away' One of the American dreams is to own a house. Many want to own a home just for the simple pride of owning it. Other benefits of owning a house is the ability to customize it to your own tastes and thereby give you more of a feeling of being "at home." Many people seem to believe that paying rent is throwing away money. There are many things to consider when deciding whether to rent or own. We need to look into what the total cost will be a month including opportunity cost of down payment, insurance on the home, repairs, and miscellaneous. After making our calculations we then must decide whether it would be more beneficial and or cost efficient to rent or own. Let's say that you could rent equivalent housing at $450 a month. Should you rent' The answer depends on your prediction about the appreciation in the market value of the house. If you think that it will appreciate at more than $75 per month ($900 per year) then you should buy the house. If you think it will appreciate at less than $75 a month, you should probably rent. However, just because you may have observed housing prices going up in some cities doesn't necessarily mean that the market value of the house you choose to buy will go up every year. Living without Debt Many people dream of a life without debt so that they would have no bills to pay. First of all, consider what a credit card or some type of revolving credit account really is. When you use the credit card, you do not immediately pay for your purchases. At the end of each month, you are given a choice—pay off all of the credit-card balance, or pay only part of it and pay interest on what remains. However, there are reasons to use credit cards or to go into debt in general. It has to do with what you are purchasing such as a car. If you pay with cash for the full price of a car, so that you owe nothing, you are in effect saving much of the purchase price of the car. Saving is a provision for future consumption. It would be pretty hard for you to buy a car with cash and still have funds left over to pay for clothes, housing, and food. So therefore, you will purchase the car on time and make monthly payments to a bank or other financial institution that might give you credit. This is why living in debt is reasonable for most people. There is no ultimate financial necessity, or advantage, to living with zero debt. Should I Purchase a Lottery Ticket' This section is concerned with whether or not we should play the lottery. To determine whether it’s a "fair" game of chance we have to examine our chances of winning over some period of time and then multiply those chances times the possible winnings. With this we come up with an expected value which is calculated by multiplying we would have to find out how much is bet, how much is taken up by administrative costs from those bettings, how much is given to education and other designated sources, and how much is left over for the actual prizes and then how much we would actually get in present value terms for those prizes. They advise us to play the lottery only if we get consumption value approximately equal to the amount of money we are betting. It is clear playing the lottery is not going to improve significantly our chances of having a better lifestyle in the future. But saving and placing what we save each year into some form of investment may improve our life later on. My Reaction After reading these articles it definitely made me think of decisions I will be making in the future. I am someone that does want to be debt free unless it is a necessity such as buying a house or a car. After reading the article on buying or renting I still believe buying is much better than renting and it is still a dream of mine to own a home. However, there where many helpful tips in which I was unaware of such as tax refund. In the tax refund article I learned a lot and was really surprised to find out that you are not better off getting a bigger refund. After reading the career choice article I believe that the career plan I have chosen for my self is very much realistic and I am getting all the education that I can get. In conclusion, after reading these articles I was surprised to find out that most of the information given was already to my knowledge.