Section 1.2
Managing Your Personal Finances
Objectives
After studying this section, you will be able to:
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Terms
cost-benefit analysis
marginal benefit
marginal cost
trade-off
opportunity cost
systematic decision-making
Making Financial Decisions
Every day you make countless decisions—big, small, important, and
unimportant. Some are so routine that you hardly use any thought at all.
Think about today. Before you left home, you decided when to get up, what
to wear, what to eat, when to leave home, and how to get to school.
Think about choices you have made that did not work well for you. You
made a promise you could not keep. You scheduled yourself to be in two
places at the same time. You ran out of money before payday. Were any of
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Case Study
Making Decisions
Maurice wants the male lead in the school play. The problem is that rehearsal
is held for two hours every weekday afternoon for the next three months. If he gets
the lead, he must quit his after-school job at the mall. If he quits now, the manager
probably would not hire him for full-time summer work. Maurice desperately needs
the income to help his family pay medical bills.
Since he is a senior, this is Maurice’s last chance to be in a high school
production. The best actors in the spring play are sometimes chosen for Summer
Theater. This often leads to a career in drama, which Maurice has always wanted.
Case Review
1. What is the trade-off if Maurice decides to keep his job?
2. What is the opportunity cost if he decides in favor of the play?
3. What other alternatives might Maurice have?
4. How would you resolve Maurice’s goal conflict if this were your decision?
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