One last point if you find it hard to save then

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Unformatted text preview: nly a small amount—will pay off later. Have you opened a savings account yet? 01 (002-029) EMC Chap 01 11/18/05 11:32 AM Page 23 interest rate of 6 percent, compounded quarterly). What is the opportunity cost to smoking? Is smoking costly? It appears to be not only costly when it comes to your health, but also when it comes to your wallet. One Last Point If you find it hard to save, then perhaps you need to know what sav- Most of us spend small amounts of money every day that could become large amounts later in life. What could you give up in favor of regular deposits to your savings account? Now, just to show you how much it matters to start saving when you are young, suppose that instead of beginning to save when you are 22, you wait until you are 40 to start saving. At 40 and each year after until you reach 65, you save $2,000. How much money would you have at 65? $106,694.68. So, how important is it to begin saving early? By setting aside just an additional $36,000 ($2,000 a year for each year between age 22 and age 40), you end up with an extra $212,831.78. Smoking or Saving? Now let’s look at saving in a different way. Recently, a person who purchased a pack of cigarettes every other day ended up buying 182 packs a year at a cost of $4 a pack. That’s a total of $728 per year spent on cigarettes. If that person had simply saved that $728 each year, instead of spending it on cigarettes, it would have ended up being $45,493.32 after 25 years (at an ing really is. It is not, as some people think, the same as not spending. Instead, it is postponed spending or future spending. In other words, because you have saved today, you have more money to spend in the future. Your decision is not between spending and saving; your decision is between spending now and spending more later. n s Action Pla al Economic My Person me consider and so want to points you may Here are some practice: want to put into elines you might save, the guid art to regularly are when you st you ❑ 1. The younger you’ll have when you retire. ey more mon ng at , I will begin savi k part-time now ly wor Even though I on y income. more least part of m tes substantially ach year) genera o or rly (e ❑ 2. Saving regulame than saving irregularly (every tw co interest in my three years). ___ percent of I will set aside ll-time job, When I have a fu y period. income every pa hing you money on somet rrently spending nk cigacu ❑ 3. If you arebetter off not spending money on (thime, it can Over ti would be money instead. try to save that rettes), a hefty sum. add up to quite month. um of _____ a ill save a minim ___ I w By giving up __ eb to ✔ ✔ ✔ ators on the W d interest calcul ach 55, y of the compoun e man the time you re Note: You can us have grown by you just read is ur savings will h yo mbers figure how muc to obtain the nu not at calculator is calculator used , 65, or 70. The If, by chance, th 60 d key in “comd_interest. gine an et/compoun owser search en at www.emcp.n calculators to ply go to any br list of relevant n you look, sim there whe ill have a long w calculator.” You pound interest choose from. Chapter 1 What Is Economics? 23 01 (002-029) EMC Chap 01 11/17/05 4:04 PM Page 24 Focus Questions What are the different ways that economists talk about “goods”? What are services? What are the four types of resources or factors of production? Why are labor and entrepreneurship different categories of resources? Basic Economic Language Key Terms tangible intangible goods utility disutility Goods and Services tangible Able to be felt by touch. For example, a book is tangible: you can touch and feel it. intangible Not able to be felt by touch. For example, an economics lecture is intangible. goods Anything that satisfies a person’s wants or brings satisfaction; also, tangible products. utility The quality of bringing satisfaction or happiness. disutility The quality of bringing dissatisfaction or unhappiness. services Tasks that people pay others to perform for them. 24 If you look closely at all the things people want, you will notice that some are tangible and some are intangible. Something is tangible if it can be felt or touched. A computer is tangible; you can touch it. Something is intangible if it cannot be felt by touch. Friendship is intangible. Economists use the term goods in different ways. On the most basic level a good is anything that satisfies a person’s wants, that brings a person satisfaction, utility, or happiness. In this sense a good can be either tangible (such as a candy bar) or intangible (the feeling of being safe and secure). It might help you to think of these goods as anything that isn’t a bad, which is something that brings a person dissatisfaction, disutility, or unhappiness. Economists and others who talk about the economy use the term goods in another way, usually when they are talking about how our economy is performing. You have probably read in the newspaper or heard on the television news the phrase goods and services. In th...
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This document was uploaded on 01/16/2014.

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