University:
Minnesota State University Moorhead
Course:
ECON-202 | Principles of Economics I: Micro
Academic year:

2022
Views:

381

Pages:

2
Author:

sapela015a

NAME _____________________________________________ DATE __________________ CLASS ___________ Math Practice for Economics Analyzing Price When making an economic decision, you need to be aware of all the costs involved. Suppose you need to buy a car to get back and forth to work. Your choices are: Car A: A new subcompact costing $13,000 Car B: A five-year-old car with 60,000 miles for $5,000 Car C: An old junker with 150,000 miles for $800 Directions: Which one should you choose? Complete the following exercises to find the initial costs and the yearly costs of owning each car for four years. Initial Costs Some initial expenses of owning a car must be paid in cash. Typical costs for these items are shown in Table 1. 1. Complete the table below. Use the car costs above and a sales tax rate of 5 percent. Initial Expense a. Title and registration b. Sales tax (Cost of car times 0.05) Cost for Car B Cost for Car A $100 $100 $13,000 × 0.05 = $650 $100 200 a. 40 b. $350 $250 $220 . c. 3 months of insurance Cost for Car C d. Total initial cash costs $1,100 c. 800 d. 2. Assume that you have saved $2,000 for the purchase. How much of this money will you be able to put toward the purchase price of each car? Car A 900 Car B 1400 Car C 800 3. For Cars A and B you will need to take out a loan. Determine how much you need to borrow for each car. a. Loan for Car A: 12100 b. Loan for Car B: 1 3600 360 NAME _____________________________________________ DATE __________________ CLASS ___________ Math Practice for Economics cont. Analyzing Price Total Costs 4. There are many Web sites that will help you figure out how much interest you will pay on an auto loan. Imagine that you get a loan for 10% for each car, how much will you pay in interest over the course of a 4 year loan? Check out several different sites to see if the interest charged changes between sites. Write down the interest charged for both Car A and Car B below. Car A 16250 Car B 6320 5. Using those same Web sites, calculate how much interest you would pay if you paid off the loan in 6 years instead of four. Car A Car B 6. Assuming you chose the 4 year loan, when you finished your payments, Car A is worth $7,000, Car B is worth $1,000, and Car C is worth nothing, having cost $3,000 in extra repairs. Calculate your total costs by subtracting the value of Cars A and B from your costs (4-year loan, plus down payment, plus initial costs) and adding $3,000 to C. Which car would you choose given what you now know? Why? Car A: 9520 Car C: 4180 I would chose B, most reasonable price . Car B: 5320 2

Analyzing Price

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