This preview shows page 1. Sign up to view the full content.
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
consider and so want to
points you may
Here are some
want to put into
elines you might
art to regularly
are when you st
❑ 1. The younger you’ll have when you retire.
, I will begin savi
k part-time now
Even though I on
least part of m
ach year) genera
❑ 2. Saving regulame than saving irregularly (every tw
___ percent of
I will set aside
When I have a fu
income every pa
money on somet
❑ 3. If you arebetter off not spending money on (thime, it can
try to save that
a hefty sum.
add up to quite
um of _____ a
ill save a minim
___ I w
By giving up __
eb to ✔ ✔ ✔ ators on the W
d interest calcul
y of the compoun
the time you re
Note: You can us
have grown by
you just read is
ur savings will
figure how muc
to obtain the nu
at calculator is
, 65, or 70. The
If, by chance, th
d key in “comd_interest.
owser search en
ply go to any br
list of relevant
n you look, sim
ill have a long
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
disutility Goods and Services
Able to be felt by touch.
For example, a book is
tangible: you can touch
and feel it.
Not able to be felt by
touch. For example, an
economics lecture is
Anything that satisfies a
person’s wants or brings
satisfaction; also, tangible products.
The quality of bringing
satisfaction or happiness.
The quality of bringing
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,
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...
View Full Document