daffyslady18 asked:

Lesson Plan: Scarcity, Choice, and Decisions

Last year, Jim Cornelius (Corny to his friends) graduated from a two-year technical training school and got a job as a lathe operator at a nearby manufacturing plant. His salary is now $1,700 per month. He expects to get very small wage increases during the next year or two, but he hopes to be promoted to line inspector in about three years, which will increase his salary by $200 a month.

Corny is sharing an apartment with a high school friend who also works at the plant. They are each spending $365 a month for a two-bedroom apartment and utilities, including local telephone service and cable TV. Corny would like to live alone in a one-bedroom apartment, but he figures that would cost about $560 a month (including utilities).

Corny has a two-year-old compact car on which he owes about $3,000. His monthly car payment is $190. He wants to buy a new car as soon as the one he has now is paid for, and he expects his car payments will be quite a bit higher.

Corny loves to listen to music, and his stereo system is a few years old. He wants to buy a new one. He has saved $300 over the past three months, but he figures that the system he wants will cost a least $1,000. He has good credit, and his credit card has a zero balance. He could charge up to $1,500, but he hates to add to his monthly payments.

Look at Corny’s monthly budget in the table below. What changes do you think he should make in his monthly spending? If you were earning Corny’s salary of $1,700 per month, how would you divide it up among these categories or for other things you want?

Budget Category

Corny You
Social Security Tax $130 $
Income Tax $200 $

Housing $365 $
(includes utilities, cable TV,
local phone)

Food – groceries $220 $

Food - eating out $75

Clothing $75 $

Car payment $190 $

Car operation (gas, oil) $45 $

Car – insurance $35 $

Car – repairs $30 $

Medical Insurance
(deductibles and copays) $25 $

Entertainment - movies, hanging out,
snacks, beverages $75 $

Health Club $15 $

Bowling $25 $

Cds $30 $

Newspaper,
books, magazines $15 $

Gifts, birthdays,
Mother’s Day etc. $20 $

Savings (for stereo) $100 $

Miscellaneous $30 $
(haircuts, toiletries,
laundry, etc.)

Question posted courtesy of: Franklin