econ 100 week 5 discussion and response

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Considering Tradeoffs You Make Every Day”

Let’s talk about two tradeoffs we face every day: how we spend our time and money.

We can only do two things with income: spend it or save it. Time is the ultimate resource. We can choose to spend time working to earn an income or we can do other things, broadly classified as leisure. Reply to these prompts to start your discussion:

  • How does a change in interest rate affect your decision to spend or save? How would a change in the interest rate affect a firm’s decision to invest or save?
  • How might an increase in the wage rate affect what you do with your time?
  • Now describe a tradeoff you’ve made in terms of time or income.

Talk about tradeoffs with your peers:

  • Reply to one peer who made a tradeoff to which you can relate. Discuss and compare your decisions.

Please read the weekly materials before answering the discussion question! When addressing the last issue raised by the question of this discussion, keep in mind that the word trade-off (or tradeoff) is a situation that involves losing one quality or aspect of something in return for gaining another quality or aspect. It often implies a decision to be made with full comprehension of both the upside and downside of a particular choice; the term is also used in an evolutionary context, in which case the selection process acts as the “decision-maker”. Please make sure you address the following three issues:

  • How does a change in interest rate affect your decision to spend or save? How would a change in the interest rate affect a firm’s decision to invest or save?
  • How might an increase in the wage rate affect what you do with your time?
  • Now describe a tradeoff you’ve made in terms of time or income.

The word” “People face tradeoffs” means ”there is no such thing as a free lunch!” or to get one thing, we usually have to give up another thing. Some things like food vs. clothing, leisure time vs. work and efficiency vs. equity can serve as examples. Making decisions requires trading off one goal against another. Efficiency means society gets the most that it can from its scarce resources. Equity means the benefits of those resources are distributed fairly among the members of society.
As a society, we need to make similar types of choices: there is always a tradeoff between efficiency and equity. A society that chooses a high degree of efficiency may seem Darwinian in the cruelest sense, as the relentless pursuit of efficiency simply ignores the suffering of those who are unable to keep up. A society that instead chooses a high degree of equity, or equal distribution of wealth, is much more humane, but will generally suffer from a high degree of inefficiency.

Class: Suppose you received $5,000 as a gift from a rich cousin. List three different ways in which you could spend the money. What are some other choices for the money?

RESPONSE TO THIS POST:

Time is absolutely the ultimate resource and it is something we can never get more of, but are always running out of. One thing we typically do with time is either work to gain money, and then either save or spend that money elsewhere. When it comes to interest rates as a consumer I think that higher interest accrual rate increases the incentive to save because the money saved will gain more interest in a shorter amount of time than it were a very low rate. As far as on the Firms side I feel that it can go either way depending on what they are investing in and how profitable that venture may be for that firm long term. I feel that if I were to receive a wage increase it would potentially change how I spend my time. If I have more money then I can afford to go out and do more, or have more vacations etc, and to me experience and memories carry far more value in the long run than temporary monetary items so yes absolutely a change in wage would absolutely change what I did with my time. One trade off I have made so far in my working career is that I have never worked voluntary overtime. While overtime would allow me to intake more money this takes away my free time I can use as leisure to hang with friends, work on music etc. So to me in this instance having my personal free time back carriers more value than spending it working for more money. There is a point where if one is always working, sure they may have more money, but they never have time to do anything with it.

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