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# 1 - Making Economic Decisions Making Economic Decisions 1...

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1 K. M. Bafna IME, WMU IME 310-1 1 of 5 Making Economic Decisions WARNING The Power Point slide presentation following this slide is copyrighted by Dr. Kailash M. Bafna, Professor, Western Michigan University. This entire presentation or any parts thereof may not be used for any purpose without the explicit written permission of Dr. Kailash M. Bafna. K. M. Bafna IME, WMU IME 310-1 2 of 5 Making Economic Decisions 1. Examples of Economic Analysis 2. The Decision Making Process K. M. Bafna IME, WMU IME 310-1 3 of 5 Example of Economic Analysis BUY A CAR : Purchase price \$35,000 Down payment of \$5,000 Loan amount of (35,000 – 5,000) = \$30,000 Annual Interest at 6% paid monthly over 3 years Monthly payment = \$30,000 x 0.0304 = \$912 per month. I can only afford monthly payments of \$600. What can I do? Then loan amount = \$600 x 32.871 = \$19,723 Purchase price should be \$19,723 + \$5,000 = \$24,723 NOTE: For now, don’t worry about where the blue numbers come from. You will learn these later. K. M. Bafna IME, WMU IME 310-1 4 of 5 Example of Economic Analysis I am currently 20 yrs. old. I want to be a millionaire by age 40.

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