Assignment 1

Assignment 1: Economic Basics
(24.0 points) 1. Describe two examples of important things that financial planning skills can help you do, and explain why these things are important to you personally. (4-6 sentences. 2.0 points)
Financial planning skills can help you save and invest money. It is important to save money in case of emergencies and/ or to save money so you can invest in valuable things later on in life. Another thing financial planning can help you do is set financial goals. By setting goals, you can learn to be smart with your money so you can plan ahead for the future.

2. List two examples of goods you have purchased in the past or may purchase in the future. (Complete sentences are not necessary. 0.5 points) Two goods I will purchase in the future are a house and a car.

3. List two examples of services you have purchased in the past or may purchase in the future. (Complete sentences are not necessary. 0.5 points) My family pays for a housekeeper and landscapers. 4. One of the functions of money is as a store of value. How does inflation affect money's ability to store value? (3-6 sentences. 2.0 points) Inflation is a sign of a weak economy. It decreases the value of money over time, so you can’t get as much for your money as you could in the past. If inflation increases, it makes more sense to invest in things that are likely to increase in value.

5. Imagine that you are considering moving to a new country and looking for a job there, but you first want to make sure the country has a strong economy. Describe at least three economic factors that you would want to research as evidence of the economy's strength or weakness, and explain how each factor would affect your decision to move there. (4-6 sentences. 3.0 points) Three things you would want to research are the country’s GDP, unemployment rate, and inflation. When a country’s GDP increases, the economy is growing and becoming stronger, and vice versa. In a strong economy, companies are growing and more people are employed than unemployed. In a weak economy, companies lose business, people lose their jobs, and unemployment rate goes up. Lastly, you should look at the country’s inflation. Inflation and unemployment usually go together. When inflation increases, so does the unemployment rate, because the value of a dollar is decreasing. 6. Explain which economic system (market, planned, mixed, or traditional) you think is best for consumers. Describe at least one reason why you think this system is best for consumers. (4-7 sentences. 3.0 points) I think a mixed economy is the best for consumers. This is because the government helps regulate some things, but not as fully as a planned economy. Most people want economic freedom but with a few government regulations in place. This type of economy helps protect consumers and small businesses.

7. In capitalism, most businesses have a profit motive. Describe at least one reason that businesses with a profit motive may be helpful for society and at least one reason that they may be harmful for society. Then, explain whether you think profit motive is a good thing or a bad thing for society. (4-7 sentences. 2.0 points) One way a business with a profit motive can be helpful is that some for-profit businesses have another motive when it comes to profit. They provide goods and services that help the environment or community. However, they can be harmful to society when they don’t really care about the consumers. For-profit companies are more likely to care about their profit then the quality of their product or what is best for the consumer. I think profit motive is good and bad for society. I think it’s good that they are interested in making as much money as they can, but bad because they don’t really care that much about the consumers which can have repercussions.

8. Choose a well-known company that you know of, and describe its direct and indirect competitors. Describe at least three direct competitors and three indirect competitors. (6-12 sentences. 3.0 points) Domino’s direct competitors are Pizza Hut, Papa John’s, and Angelina’s. These three other restaurants sell the same product as Domino’s. They also deliver, which makes them direct competitors. Domino’s indirect competitors are Beijing, Garden Café, and Folaf African Restaurant. Beijing has Chinese food, Garden Café has sandwiches, Folaf has African food, and Domino’s has pizza. They are indirect competitors because although they all sell and deliver food, each restaurant has a different type of food.

9. Imagine that you are buying a new computer and comparing different brands and prices. Describe at least two nonprice competition factors you might consider when making your decision. (2-4 sentences. 2.0 points) Many products are advertised with celebrities to make them seem desirable and cool. For example, Justin Bieber was on a Proactive commercial to make young girls believe he uses that product to keep his skin clear and those teens would ask their parents to get the product for them since Justin Bieber “uses” it. Another thing you might want to consider is quality. Companies try to convince customers that their item has better quality instead of a lower price. 10. Describe a real or made up but realistic example of a product that went through a time of scarcity, when demand was greater than the supply. What is the product, and why do you think it became scarce? What happened to the price of the product when it was scarce? (3-6 sentences. 2.0 points) Over-fishing can result in a scarcity of a type of fish. If you hunt a lot of fish in one area and are catching more than are reproduced and matured, then you’ll have a scarcity in that fish. Once you have over-fished, you’d have to wait until the fish population begins to flourish before you could start fishing again. While the fish is scarce, the price will increase because people want them but there isn’t enough for everyone so only the people who can afford it can have them. 11. Describe a product, and then give an example of a time when the demand for this product might be high and the demand for this product might be low. (2-4 sentences. 2.0 points) If a new movie came out on DVD it would be expensive because it’s brand new, not everyone can get a copy, and people will pay the high price for the DVD. This is an example of the product being in high demand. If you were to wait a couple months before buying the DVD, the price would go down because demand would go down. If a lot of people bought it when it was new, then there aren’t so many people who don’t have it yet.

12. Describe an example of a product that has highly elastic demand. Describe at least two factors that make this product's demand so elastic. (4-6 sentences. 2.0 points) An example would be bread at a grocery store. The grocery store sells several different types of bread but only puts one type on sale. A lot of people will buy the sale bread only because it’s on sale, otherwise they wouldn’t normally buy it. The more competition an item has, the higher it’s elasticity. In this example, the consumers have many different choices of bread, which makes it easier for them to switch to the one offering the lower price.