SNL: Stop Buying Stuff You Cannot Afford

SNL "Stop Buying Stuff You Cannot Afford" from Credit Abuse Resistance Educaton on Vimeo.

Quiz: Investing 101

Answer the following in complete sentences as if you were explaining it to someone who wasn't taking our class:

1. What does "single stock investing" mean?
2. What is "compound interest"?
3. What is "liquidity"?
4. What is "diversification"?
5. What is a "mutual fund"?
6. What is a "pinnacle point" in investing?
7. What is a "risk/return ratio"?
8. Why is the Tortoise & the Hare an important lesson to learn?
9. What are the Pro's & Con's (good and bad points) of the following plans/investments:
1. Stocks
2. Mutual Funds
3. Real Estate
4. Gold
5. Business Ventures
6. Savings Account
7. Money Market Accounts
8. Lottery Tickets

Diversification and Dollar Cost Averaging

You probably remember our discussions of the importance of diversification when investing.  It follows the idea of "Don't put all your eggs in one basket" -- meaning if you put all of your eggs [investments] into one basket, and that basket gets destroyed, you lose everything.  By putting a some of your eggs in one basket [savings], some of your eggs in another basket [individual stocks], some of your eggs in another basket [mutual funds] and some of your eggs in another basket [real estate] -- you are more stable in the long run.

Today we are going to begin discussing Dollar Cost Averaging -- a process by which you buy a regular dollar amount worth of something [i.e. a mutual fund] at regular intervals [i.e. monthly] regardless of the price at that time.

For example: Imagine that you are going to invest $100 per month in a certain stock.  This month the stock is at $10 per share so you will be able to buy 10 shares.  Next month the stock is at $11 per share so you will only be able to buy 9.09 shares.  The following month the stock drops to $9 per share so you are able to get 11.11 shares.  In month 4 the stock is up to $16 so you can only afford 6.25 shares.  You now own 36.25 shares of stock worth an estimated  $580 -- and you have invested only $400.  Obviously if stocks suddenly dropped back to the $10 per share where you started, your stocks would only be worth $362.50, but the stock market has a pretty strong track record of upward movement over time.  Even so, don't forget the concept of diversification... and don't invest money you can't afford to lose.

 Now I always suggest consulting multiple sources of information prior to investing.  Here's an example of reasons NOT to use Dollar Cost Averaging.  I disagree with his reason, but it's good to listen to varied opinions.

 

And Mark Cuban talking about why NOT to diversify:

13.2: Inflation

Before we begin 13.2, let's look a couple pages back at page 341 and discuss the Unemployment Rate.

13.2: Inflation

• What are the causes and effects of inflation? (p.342): Chart
• Chart Skills (p.343): #1 & 2
• What is Inflation? (p.344): 
• What inputs may have contributed to higher ticket prices for these events?
• Political Cartoon:
• How will consumers react to an increase in the cost of goods and services?  
• How might an increase in wages affect prices?
• Inflation Rate (p.345): #1 & 2
• The Wage-Price Spiral (p.346): #1 & 2
• Economics & You (p.347): How has inflation changed your spending habits?
• Section 2 Assessment (p.348): 2, 3, 6, 7, 10a, 10b, 10c

What is Monetary Inflation?

Inflation Explained

9.2: Labor and Wages / The Minimum Wage Debate

Chapter 9 Section 2: Labor and Wages

Assignment:

• Read the two Wall Street Journal articles and answer the questions on a separate sheet of paper.
• Complete the answer sheet.
• Vocabulary (p.226)
• Factors Affecting Wages (p.226): Chart
• Checkpoint (p.227): What determines the equilibrium wage of labor?
• Graph Skills (p.227): #1 & 2
• Visual Glossary (p.228): Why are investments in training and technology important for a business?  At what point would increased investment not result in increased productivity?
• Graph Skills (p.229): #1 & 2
• Graph Skills (p.230): #1 & 2
• Checkpoint (p.230): How do education, training, and experience affect wages?
• Graph Skills (p.231): #1 & 2
• Cartoon (p.231): How does this cartoon symbolize a glass ceiling for women?
• Graph Skills (p.232): #1 & 2
• Checkpoint (p.232): What groups have been hurt by wage discrimination?
• Question (p.234): What are some of the costs that are eliminated when a company replaces workers with machines?

---

Animated History of the Minimum Wage: http://business.time.com/2014/02/28/an-animated-history-of-the-minimum-wage/



 
   

9.1: Labor Market Trends

Chapter 9 Lesson 1: Labor Market Trends

• Graph Skills (p.218): #1 & 2
  
• Checkpoint (p.218): What important information can we learn from the Bureau of Labor Statistics?
• Graph Skills (p.219): #1 & 2
• Graph Skills (p.220): #1 & 2
• Checkpoint (p.220): Why do companies engage in offshoring?
• Graph Skills (p.221): #1 & 2
• Summarize [in your own words] the 4 reasons for "temporary employees". (p.222)
• Case Study (p.223): How has the economic downturn changed the nature of employment for many people?
• Checkpoint (p.224): How are education and income connected?
• Graph Skills (p.225): #1 & 2
• Checkpoint (p.225): Why have real wages dropped in recent years?
• Section 1 Assessment (p.225): #3, 4, 5, 6, 7, 8

http://www.theguardian.com/law/child-labour

5.2: Starting Your Business

As you start your business, you begin with 1 employee (yourself) and then through the course of the first year you may try to add more employees to see how much production you can achieve.  For example, if you produce something (a pair of shoes, a beanbag chair, etc.) or provide a service (cutting trees, washing cars, etc.) or selling something, you can keep track of the output to know how productive you are.

• Using the chart on page 117 as a model, create a table relating to your specific business:

MARGINAL PRODUCT OF LABOR

Labor	Output	Marginal Product
0	0	--
1
2
3
4
5
6
7
8

• Marginal Product of Labor (p.117): Chart Skills 1 & 2
• What could be a possible reason for having less output after adding additional employees?
• What are Production Costs? (p.119): #1 & 2
• Looking at your particular business:
• What are your fixed costs?
• What are your variable costs?
• Checkpoint (p.120): Why does a closed factory still have production costs?
• Checkpoint (p.122): When should a firm keep a money-losing factory open?
• Production Skills (p.120): #1 & 2
• Section 1 Assessment (p.122): #4, 6, 7

Chapter 6: Section 3

Background note about price:  Apple introduced a black version if its popular iPod in the fall of 2005.  It was technically identical to the traditional white version and sold for the same price.  Inventories of the black version were quickly depleted, while the white iPod remained in stock.  Apple continued to sell both versions at the same price.  The company reacted to this price signal in a different way, however.  When it introduced its new laptop computer, MacBook, in the spring of 2006, the white machines sold for $1349.  The identical black MacBook cost $1499.

Assignment:

• #2: Prices often act as signals.  Describe how prices acted as a signal or an incentive in the last two major purchases that you made.
• #5: Why do buyers and sellers conduct business on the black market?
• #7a: What is the quickest way to solve a shortage?
• #7b: What is the quickest way to eliminate a surplus?
• #9: Describe three market problems that prevent efficient allocation of resources.
• #10: Look at the illustrated "Economics & You" feature (p.153) on profit incentive.  List additional examples of how the desire for profit motivates people.
• Do you agree or disagree that incentives motivate people's actions?  How do incentives affect your daily life?

Labor Day: The Economic Origins of a Holiday

Note: Monday is Labor Day!  Three day weekend!!!  But what is "Labor Day" about?

Labor Day is today considered a day for relaxation, BBQ's, and a nice day off of work.  But where did it begin?