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Economics and Consumer Decisions

Economics and Consumer Decisions

Author(s): Michael L Walden , Jessie X Fan

Edition: 3

Copyright: 2013

Pages: 852

Edition: 3

Copyright: 2013

Pages: 852

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ISBN 9781465233097

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Economics & Consumer Decisions shows how economics can be used to help make the multitude of financial and consumer decisions we face, and it gives answers, rather than generalities, to many of the decisions. This text brings economic theory and concepts out of the ivory tower and into the hands of everyday people.

Economics & Consumer Decisions features:

  • In-depth analysis of consumer decisions
  • Topics in the form of questions
  • Concepts developed from an intuitive basis rather than simply stated
  • Mistakes of “pop personal finance” books and why their assertions are wrong
  • Several important topics, which are often ignored in other textbooks, including future value, discounting, and annuities

 

Economics & Consumer Decisions will equip you with the practical tools of economic analysis.

About the Authors

Acknowledgments

Preface to the Third Edition

1 Microfoundations: Concepts for Making Consumer Decisions

1 Are Prices "Really" What They Seem?

2 What's Your Time Worth?

3 Why Isn't the Tenth Hot Dog as Good as the First?

4 Why Should You Worry about Supply and Demand?

5 Why Should You Always Look Over Your Shoulder

(Economically Speaking)?

6 Why Doesn't Everyone Earn the Same Amount of Money?

7 Does Inflation Doom Us to an Existence of Poverty?

8 How Is Inflation Measured?

9 How Can You Adjust for Inflation?

10 Why Do Interest Rates Exist?

11 How Does Money Grow?

12 Back to the Present: What's a Future Dollar Worth?

13 How Do You Calculate an Average-The Economic Way?

14 When Is a Dollar in Hand Worth More Than Two Dollars in the Bush?

2 Macrofoundations: What You Can't Control but Should KnowAbout

1 How Is Your Life Affected by Economic Events?

2 What Causes Inflation?

3 What Pushes the Economic Roller Coaster?

4 The Long and Short of Interest Rates: What Does the Spread Tell You?

5 But What about Those Deficits?

6 Riding the Economic Roller Coaster, or How Can You Forecast the Economy?

3 Organizing Your Financial Life

1 Do You Need a Budget?

2 How Does the Average Consumer Spend Money?

3 Does a Budget Have to Be a Financial Straightjacket?

4 How Do You Tell "How You're Doing?"

5 How Big Is Your Tax Bite?

6 How Can You Cut through the Tax Form Jungle?

7 Should Reducing Taxes Be a Financial Goal?

8 Is Postponing Taxes a Good Idea?

9 What Is Financial Planning?

4 Shelter

1 Where to Live

2 What Determines the Prices of Shelter?

3 What Are the Costs of Owning a Home?

4 How Good of an Investment Is a Home?

5 Should You Own or Rent?

6 Is There a Best Time to Buy a House?

7 How Much of a Downpayment Should You Make?

8 Are Mortgages Rip-offs? The Meaning and Calculation of Mortgage Payments

9 How Much Home Can You Afford?

10 An Overview of Mortgages: What Are the Options?

11 What Are the Pluses and Minuses of a Fixed Rate Mortgage?

12 The Graduated Payment Mortgage: A Step-Ladder Mortgage

13 The Adjustable Rate Mortgage: Roulette for the Homebuyer?

14 Should You Take a Fixed or Adjustable Rate Mortgage?

15 Which ARM Index Is Best?

16 Should You Pay Points for a Lower Mortgage Rate?

17 Is a 15 Year Mortgage Better Than a 30 Year Mortgage?

18 Should You Prepay a Mortgage, or Pay-Down a Mortgage, or Make Extra Monthly Principal Payments?

19 Buydowns: Bargains or Gimmicks?

20 Should You Take a Biweekly Mortgage?

21 Should You Share a Mortgage?

22 What Is Seller Financing?

23 When Should You Refinance Your Mortgage?

24 Another Look-How Do the Various Mortgages Compare?

25 What Can You Do to Sell Your House?

5 Buying Consumer Durables and Using Credit

1 Why Use Credit?

2 How Do You Calculate the Cost of Credit?

3 What in the World Is the "Rule of 78"?

4 What Does the APR Mean?

5 What Are the Total Costs of a Consumer Durable Good?

6 What Are the Benefits of a Consumer Durable Good?

7 When Should You Replace a Consumer Durable Good?

8 Should You Rent or Buy a Consumer Durable: The Case of Cars

9 Are Rent-to-Own Contracts Good Deals?

10 Where Can-You Get Consumer Credit?

11 What Kinds of Credit Cards Are Best?

12 How Can You Get Credit Out of Your Home, and Should You?

13 How Can You Compare Consumer Credit Loans?

14 How Can You Get Credit?

15 How Much Credit Is Too Much Credit?

16 How Can You Get Out of Credit Problems?

6 Life Insurance

1 Why Insurance?

2 How Does Life Insurance Work?

3 What Questions Should You Ask About Life Insurance?

4 Who Needs Life Insurance?

5 How Much Life Insurance? The Income Approach

6 How Much Life Insurance? The Expense Approach

7 Inflation Again! Life Insurance Requirements as the Insured Lives!

8 How Often Should You Re-evaluate Your Life Insurance?

9 How Are Life Insurance Premiums Calculated?

10 Who Should Buy Term Insurance?

11 Who Should Buy Whole Life Insurance?

12 How to Compare a Term and a Whole Life Policy

13 Who Should Buy an Endowment Policy?

14 Who Should Buy Universal Life Insurance?

15 Who Should Buy Single Premium Life Insurance?

16 What Is Decreasing Term Life Insurance?

17 Are Group Life Insurance Policies Better?

18 Should You Switch Life Insurance Policies?

19 Are Participating Policies Better Than Non-Participating Policies?

20 One More Time-Which Policy Is Best for You?

21 Do You Need Life Insurance After the Kids Are Gone?

22 Is the Fine Print of Life Insurance Policies Important?

23 Why Do Prices of Life Insurance Policies Differ?

24 Credit Life Insurance: Rip-Off or Convenience?

25 Do Life Insurance Policies Save You Taxes?

7 Health, Property, and Auto Insurance

1 What Should You Insure?

2 What Determines Insurance Prices?

3 How Much of a Deductible Should You Take?

4 How Much Disability Insurance Do You Need?

5 What Are the Typical Health Insurance Provisions You Need to Know?

6 What Kinds of Health Insurance Are Out There?

7 How Can You Pay for Long-Term Health Care?

8 How Much Property Insurance Do You Need?

9 What Kind of Auto Insurance Should You Buy?

8 Fundamentals of Investing

1 Why Should You Invest?

2 How Does the Economy Influence Investments?

3 What Does Investment Risk Mean?

4 How Do You Calculate the Return on Your Investments?

5 How Many Baskets Should Hold Your Investment Eggs?

6 Should You Invest in Yourself?

7 Should You Invest in Your Family?

9 Types of Investments

1 Why Should You Consider Investments from the Federal Government?

2 Are CDs the Lazy Person's Investment?

3 How Can Bonds Earn More Than Stocks or Gold?

4 How Can You Invest in Mortgages?

5 Should You Plunge into the Stock Market?

6 How Can You Pick Stocks?

7 When Does Gold Glitter?

8 What Are the Returns from Real Estate?

9 Are the Benefits of Mutual Funds Worth Their Cost?

10 How Can You Save for Your Child's Education?

11 Now That You've Read All This, What Do You Do?

10 Retirement Planning

1 How Much Should You Save for Retirement?

2 How Much Will You Get from Social Security?

3 What Will You Get from Your Pension?

4 How Can You Receive Your Retirement Income?

5 Should You Retire Early?

6 Should You Use Annuities to Save for Retirement?

7 Should You Use IRAs and Similar Plans to Save for Retirement?

8 Should You Use Life Insurance as a Source of Retirement Income?

9 How Can You Use Your House for Retirement Income?

10 Do You Need an Estate Plan?

11 Shopping and Information Gathering

1 Does "Shopping Around" Pay?

2 Do Higher Prices Indicate Higher Quality?

3 Why Do Sellers Charge Different Prices for the Same Product?

4 Are "Sales" Ever for Real?

5 Will Buying in Bulk Save You Money?

6 Should You Avoid "Loss Leaders," "Rain Checks," and "Bait and Switch"

Tactics?

7 Are Warranties and Service Contracts "Good Deals"?

8 Should Consumers Be Protected?

12 Summing Up

A Appendix

A-1 Annual Future Value Factors

A-2 Monthly Future Value Factors

A-3 Monthly Future Value Factor Sums

A-4 Annual Present Value Factors

A-5 Monthly Present Value Factors

A-6 Monthly Present Value Factor Sums

A-7 Loan Balance 30 Years

A-8 Loan Balance 15 Years

A-9 Loan Balance 5 Years

A-10 Loan Balance 4 Years

A-11 Loan Balance 3 Years

A-12 Loan Balance 2 Years

Michael L Walden
Dr. Michael L. Walden has spent thirty-five years as an educator in the classroom, among his colleagues, and in thousands of meetings to residents of North Carolina. Walden received his Ph.D. from Cornell University and has been at North Carolina State University his entire career. He currently is a William Neal Reynolds Distinguished Professor in the Dept. of Agricultural and Resource Economics. The author of eight books and over 250 articles and reports, Walden presents daily radio programs, a monthly radio call-in program, and writes a biweekly newspaper column-in addition to his classroom teaching. Among Walden's numerous awards are the Champion-Tuck Award for quality in broadcasting, several American Council on Consumer Interests research awards, and the University of North Carolina Board of Governor's Award for Excellence in Public Service. In 2013 he was made a member of the Order of the Long Leaf Pine by North Carolina Governor Perdue.
Jessie X Fan
Dr. Jessie X. Fan received her Ph.D from The Ohio State University in Family and Consumer Economics in 1993 and her Master's degree from Fudan University in China in International Economics in 1989. Since 1993 she has been at the University of Utah where she is a Professor in the Department of Family and Consumer Studies. Dr. Fan has taught many courses related to family and consumer economics, including consumer economic theory, family economic issues across the life span, family investment planning, tax planning, and families and economic policies. She served as the director of the Certified Financial Planning program at the University of Utah. Dr. Fan's research focuses on consumer expenditure behaviors, financial management, and consumer health issues. She has published many research articles in academic journals, and serves on the editorial board for four journals in the consumer and family economics field, including the Journal of Consumer Affairs and the Journal of Families and Economic Issues. She has also served on the Utah State's Child Support Guidelines Committee for many years.

Economics & Consumer Decisions shows how economics can be used to help make the multitude of financial and consumer decisions we face, and it gives answers, rather than generalities, to many of the decisions. This text brings economic theory and concepts out of the ivory tower and into the hands of everyday people.

Economics & Consumer Decisions features:

  • In-depth analysis of consumer decisions
  • Topics in the form of questions
  • Concepts developed from an intuitive basis rather than simply stated
  • Mistakes of “pop personal finance” books and why their assertions are wrong
  • Several important topics, which are often ignored in other textbooks, including future value, discounting, and annuities

 

Economics & Consumer Decisions will equip you with the practical tools of economic analysis.

About the Authors

Acknowledgments

Preface to the Third Edition

1 Microfoundations: Concepts for Making Consumer Decisions

1 Are Prices "Really" What They Seem?

2 What's Your Time Worth?

3 Why Isn't the Tenth Hot Dog as Good as the First?

4 Why Should You Worry about Supply and Demand?

5 Why Should You Always Look Over Your Shoulder

(Economically Speaking)?

6 Why Doesn't Everyone Earn the Same Amount of Money?

7 Does Inflation Doom Us to an Existence of Poverty?

8 How Is Inflation Measured?

9 How Can You Adjust for Inflation?

10 Why Do Interest Rates Exist?

11 How Does Money Grow?

12 Back to the Present: What's a Future Dollar Worth?

13 How Do You Calculate an Average-The Economic Way?

14 When Is a Dollar in Hand Worth More Than Two Dollars in the Bush?

2 Macrofoundations: What You Can't Control but Should KnowAbout

1 How Is Your Life Affected by Economic Events?

2 What Causes Inflation?

3 What Pushes the Economic Roller Coaster?

4 The Long and Short of Interest Rates: What Does the Spread Tell You?

5 But What about Those Deficits?

6 Riding the Economic Roller Coaster, or How Can You Forecast the Economy?

3 Organizing Your Financial Life

1 Do You Need a Budget?

2 How Does the Average Consumer Spend Money?

3 Does a Budget Have to Be a Financial Straightjacket?

4 How Do You Tell "How You're Doing?"

5 How Big Is Your Tax Bite?

6 How Can You Cut through the Tax Form Jungle?

7 Should Reducing Taxes Be a Financial Goal?

8 Is Postponing Taxes a Good Idea?

9 What Is Financial Planning?

4 Shelter

1 Where to Live

2 What Determines the Prices of Shelter?

3 What Are the Costs of Owning a Home?

4 How Good of an Investment Is a Home?

5 Should You Own or Rent?

6 Is There a Best Time to Buy a House?

7 How Much of a Downpayment Should You Make?

8 Are Mortgages Rip-offs? The Meaning and Calculation of Mortgage Payments

9 How Much Home Can You Afford?

10 An Overview of Mortgages: What Are the Options?

11 What Are the Pluses and Minuses of a Fixed Rate Mortgage?

12 The Graduated Payment Mortgage: A Step-Ladder Mortgage

13 The Adjustable Rate Mortgage: Roulette for the Homebuyer?

14 Should You Take a Fixed or Adjustable Rate Mortgage?

15 Which ARM Index Is Best?

16 Should You Pay Points for a Lower Mortgage Rate?

17 Is a 15 Year Mortgage Better Than a 30 Year Mortgage?

18 Should You Prepay a Mortgage, or Pay-Down a Mortgage, or Make Extra Monthly Principal Payments?

19 Buydowns: Bargains or Gimmicks?

20 Should You Take a Biweekly Mortgage?

21 Should You Share a Mortgage?

22 What Is Seller Financing?

23 When Should You Refinance Your Mortgage?

24 Another Look-How Do the Various Mortgages Compare?

25 What Can You Do to Sell Your House?

5 Buying Consumer Durables and Using Credit

1 Why Use Credit?

2 How Do You Calculate the Cost of Credit?

3 What in the World Is the "Rule of 78"?

4 What Does the APR Mean?

5 What Are the Total Costs of a Consumer Durable Good?

6 What Are the Benefits of a Consumer Durable Good?

7 When Should You Replace a Consumer Durable Good?

8 Should You Rent or Buy a Consumer Durable: The Case of Cars

9 Are Rent-to-Own Contracts Good Deals?

10 Where Can-You Get Consumer Credit?

11 What Kinds of Credit Cards Are Best?

12 How Can You Get Credit Out of Your Home, and Should You?

13 How Can You Compare Consumer Credit Loans?

14 How Can You Get Credit?

15 How Much Credit Is Too Much Credit?

16 How Can You Get Out of Credit Problems?

6 Life Insurance

1 Why Insurance?

2 How Does Life Insurance Work?

3 What Questions Should You Ask About Life Insurance?

4 Who Needs Life Insurance?

5 How Much Life Insurance? The Income Approach

6 How Much Life Insurance? The Expense Approach

7 Inflation Again! Life Insurance Requirements as the Insured Lives!

8 How Often Should You Re-evaluate Your Life Insurance?

9 How Are Life Insurance Premiums Calculated?

10 Who Should Buy Term Insurance?

11 Who Should Buy Whole Life Insurance?

12 How to Compare a Term and a Whole Life Policy

13 Who Should Buy an Endowment Policy?

14 Who Should Buy Universal Life Insurance?

15 Who Should Buy Single Premium Life Insurance?

16 What Is Decreasing Term Life Insurance?

17 Are Group Life Insurance Policies Better?

18 Should You Switch Life Insurance Policies?

19 Are Participating Policies Better Than Non-Participating Policies?

20 One More Time-Which Policy Is Best for You?

21 Do You Need Life Insurance After the Kids Are Gone?

22 Is the Fine Print of Life Insurance Policies Important?

23 Why Do Prices of Life Insurance Policies Differ?

24 Credit Life Insurance: Rip-Off or Convenience?

25 Do Life Insurance Policies Save You Taxes?

7 Health, Property, and Auto Insurance

1 What Should You Insure?

2 What Determines Insurance Prices?

3 How Much of a Deductible Should You Take?

4 How Much Disability Insurance Do You Need?

5 What Are the Typical Health Insurance Provisions You Need to Know?

6 What Kinds of Health Insurance Are Out There?

7 How Can You Pay for Long-Term Health Care?

8 How Much Property Insurance Do You Need?

9 What Kind of Auto Insurance Should You Buy?

8 Fundamentals of Investing

1 Why Should You Invest?

2 How Does the Economy Influence Investments?

3 What Does Investment Risk Mean?

4 How Do You Calculate the Return on Your Investments?

5 How Many Baskets Should Hold Your Investment Eggs?

6 Should You Invest in Yourself?

7 Should You Invest in Your Family?

9 Types of Investments

1 Why Should You Consider Investments from the Federal Government?

2 Are CDs the Lazy Person's Investment?

3 How Can Bonds Earn More Than Stocks or Gold?

4 How Can You Invest in Mortgages?

5 Should You Plunge into the Stock Market?

6 How Can You Pick Stocks?

7 When Does Gold Glitter?

8 What Are the Returns from Real Estate?

9 Are the Benefits of Mutual Funds Worth Their Cost?

10 How Can You Save for Your Child's Education?

11 Now That You've Read All This, What Do You Do?

10 Retirement Planning

1 How Much Should You Save for Retirement?

2 How Much Will You Get from Social Security?

3 What Will You Get from Your Pension?

4 How Can You Receive Your Retirement Income?

5 Should You Retire Early?

6 Should You Use Annuities to Save for Retirement?

7 Should You Use IRAs and Similar Plans to Save for Retirement?

8 Should You Use Life Insurance as a Source of Retirement Income?

9 How Can You Use Your House for Retirement Income?

10 Do You Need an Estate Plan?

11 Shopping and Information Gathering

1 Does "Shopping Around" Pay?

2 Do Higher Prices Indicate Higher Quality?

3 Why Do Sellers Charge Different Prices for the Same Product?

4 Are "Sales" Ever for Real?

5 Will Buying in Bulk Save You Money?

6 Should You Avoid "Loss Leaders," "Rain Checks," and "Bait and Switch"

Tactics?

7 Are Warranties and Service Contracts "Good Deals"?

8 Should Consumers Be Protected?

12 Summing Up

A Appendix

A-1 Annual Future Value Factors

A-2 Monthly Future Value Factors

A-3 Monthly Future Value Factor Sums

A-4 Annual Present Value Factors

A-5 Monthly Present Value Factors

A-6 Monthly Present Value Factor Sums

A-7 Loan Balance 30 Years

A-8 Loan Balance 15 Years

A-9 Loan Balance 5 Years

A-10 Loan Balance 4 Years

A-11 Loan Balance 3 Years

A-12 Loan Balance 2 Years

Michael L Walden
Michael L Walden
Dr. Michael L. Walden has spent thirty-five years as an educator in the classroom, among his colleagues, and in thousands of meetings to residents of North Carolina. Walden received his Ph.D. from Cornell University and has been at North Carolina State University his entire career. He currently is a William Neal Reynolds Distinguished Professor in the Dept. of Agricultural and Resource Economics. The author of eight books and over 250 articles and reports, Walden presents daily radio programs, a monthly radio call-in program, and writes a biweekly newspaper column-in addition to his classroom teaching. Among Walden's numerous awards are the Champion-Tuck Award for quality in broadcasting, several American Council on Consumer Interests research awards, and the University of North Carolina Board of Governor's Award for Excellence in Public Service. In 2013 he was made a member of the Order of the Long Leaf Pine by North Carolina Governor Perdue.
Jessie X Fan
Jessie X Fan
Dr. Jessie X. Fan received her Ph.D from The Ohio State University in Family and Consumer Economics in 1993 and her Master's degree from Fudan University in China in International Economics in 1989. Since 1993 she has been at the University of Utah where she is a Professor in the Department of Family and Consumer Studies. Dr. Fan has taught many courses related to family and consumer economics, including consumer economic theory, family economic issues across the life span, family investment planning, tax planning, and families and economic policies. She served as the director of the Certified Financial Planning program at the University of Utah. Dr. Fan's research focuses on consumer expenditure behaviors, financial management, and consumer health issues. She has published many research articles in academic journals, and serves on the editorial board for four journals in the consumer and family economics field, including the Journal of Consumer Affairs and the Journal of Families and Economic Issues. She has also served on the Utah State's Child Support Guidelines Committee for many years.