ECO-FPX1150_SmithLashawn_Assessment1-Attempt1

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Capella University *

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1150

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Economics

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Jul 3, 2024

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ECO-FP1100 Assessment 1 Template Budget 1 Dollars ($) Percent (%) Income 50,000 100 Expenditures Housing 8,500 17.0 Food 5,500 11.0 Utilities 5,000 10.0 Transportation 7,000 14.0 Taxes 6,000 12.0 Debt Payments or Savings 5,500 11.0 Soc. Security, Personal Ins., 401k 5,000 10.0 Health Care 2,500 5.0 Entertainment 2,000 4.0 Apparel 1,400 2.8 Misc 1,000 2.0 Personal Care 600 1.2 Total 50,000 100 Budget 2 1

ECO-FP1100 Dollars ($) Percent (%) Income 51,000 100 Expenditures Housing 10,000 19.6 Food 5,300 10.4 Utilities 5,100 10.0 Transportation 7,000 13.7 Taxes 5,800 11.4 Debt Payments or Savings 4,900 9.6 Soc. Security, Personal Ins., 401k 5,000 9.8 Health Care 2,600 5.1 Entertainment 1,100 2.2 Apparel 900 1.8 Misc 700 1.3 Personal Care 600 1.2 Education 2,000 3.9 Total 25,000 100 2

ECO-FP1100 Scenario Your child is starting a two-year culinary program at community college this year and was awarded a small grant to cover some of the cost. You need to adjust your budget for this additional expense, as well as consider and project future economic trends. At the beginning of this year, the cost of housing for example rose as there were more renters than rental units. Additionally, certain trade decisions have made some imported item more expensive than the previous year. The family’s income changed slightly, but because of these economic changes, will need to make changes to the yearly budget. You will need to analyze spending in the prior year (Budget 1) and the current budget (Budget 2) for this year. Your family might not be happy with some of your decisions about where to spend less or where to spend more. So, you also need to be prepared to explain the reasoning for your decisions to them. Questions 1. You have learned about economic concepts such as supply and demand, scarcity, tradeoff decisions, international trade, opportunity cost, and compound growth. Think about the economic concepts you encountered in the resources for this assessment, or those you know about from previously learning or research. These could include concepts such as supply and demand, scarcity, tradeoff decisions, inflation, and opportunity costs. Choose at least one economic concept and describe how it is relevant to the scenario and your two budgets.  Inflation, a sustained increase in the general price level of goods and services, has led to increased costs of housing, utilities, and imported items. This decrease in purchasing power has led to adjustments to my family's budget. For instance, a 17.0% expenditure on housing in Budget 1 compared to 19.6% in Budget 2 may require a trade-off decision, balancing the benefits of a comfortable living space with potential opportunity costs. 2. How did expenditures change between budgets? Which expenditures changed the most? Which expenditures changed the least? Which stayed the same? Summarize the change in expenditures between budgets.  My family's financial situation has significantly changed in Budget 2, with expenditures increasing by $25,000 compared to Budget 1, requiring us to allocate our income differently and make difficult trade-off decisions about where to spend our money. The most significant increases were Housing, Taxes, and Education. 3. What were the economic trends that created the need for your family to change their expenditures? What can you infer about the connection between prices and expenditures, based on the economic concepts you have learned? Describe the economic trends that created the need for a change in expenditures. 3

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ECO-FP1100  Inflation, changes in supply and demand, and trade decisions have led to increased costs in housing, utilities, and imported items. This has led to a decrease in the purchasing power of the my family's income. My family must adjust our budget to accommodate these changes, allocating their income differently to meet our needs and wants. We may need to make difficult trade-off decisions, such as reducing spending on entertainment or personal care, to accommodate these increased expenses. This situation highlights the importance of understanding economic trends and making informed decisions to manage financial risks. 4. Think of a way to explain the rationale for your budget decisions to your family. Some questions you could think about to help create your explanation are:  Why did you decide to buy less food?  Why did your housing costs increase?  Why did you decide to cut the most from entertainment and apparel?  Why couldn't you change the amount you spent on transportation (this likely includes your car payment)? o What other areas had to remain the same?  Why did you decide to reduce the amount that you paid towards existing debt or put into savings, and what will the long- term effects of that be? Hello everyone, I know that our budget has changed this year, and I want to take a moment to explain why we made certain decisions. As you know, our child is starting a culinary program at community college, and we received a small grant to help cover some of the costs. However, this means we need to make some adjustments to our budget to accommodate the additional expense. Firstly, let's talk about housing. You may notice that our housing costs increased significantly in Budget 2. Unfortunately, the rising demand for rental units in the area led to higher prices. We couldn't avoid this increase, but we did try to find ways to minimize the impact on our overall budget. Regarding food expenses, we did reduce our spending in this category. While it's not an easy decision, we had to prioritize other areas of our budget that are more critical for our family's well-being. We're still allocating a significant amount for food, but we're being more mindful of our spending habits and trying to cook at home more often. As for entertainment and apparel, we had to make some tough choices. We're reducing our spending in these areas because we need to allocate more funds towards our child's education expenses. We understand that this may not be the most exciting news, but we believe it's essential for their future. Our transportation costs remain the same because we couldn't reduce our car payment or insurance expenses. However, we did try to optimize our daily routines and find ways to reduce fuel consumption. 4

ECO-FP1100 We did have to reduce our debt payments and savings contributions. This was a difficult decision, but we believe it's necessary to prioritize our child's education expenses and ensure they have the best possible start in their culinary program. In the long run, this investment will benefit our family as a whole. We understand that these changes may cause some inconvenience, but we hope you understand the reasoning behind our decisions. We're committed to making adjustments as needed and finding ways to adapt to the changing economic landscape. Let's work together to make this work and support our child's educational goals. 5. In our personal lives, we sometimes need to react to changes in our economic environment. Thinking about your own budget, describe how a change in an economic variable (such as a change in income, employment, interest rates, or prices) from within the last year either has impacted or could impact your personal life and finances. If the trend continues over the next year or two, what predictions could you make about further impacts to your personal life and finances?  A 10% increase in income due to a promotion has significantly impacted personal life and finances. This has allowed for increased savings, debt repayment, investment in retirement accounts, and upgrading living conditions. However, the increased income has also led to increased housing costs, transportation expenses, and food budget adjustments. If this trend continues, it could lead to faster debt repayment, increased career opportunities, adapting to job market changes, and reassessing spending habits. The financial situation has both benefits and challenges, and the individual must remain vigilant and adjust their budget and priorities accordingly. 5

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