Impact of Economics on Daily Living

 
Scenario: A friend who knows that you are learning problem solving skills and economics has come to you for advice. At the beginning of this year, rent and the price of imported food rose. At the same time, prices for domestic food dropped. The family’s income stayed the same, but because of these economic changes, they had to make changes to their yearly budget.
Your friend’s family is unhappy about the lifestyle changes that your friend has chosen. Your friend knows that you are studying personal finance and have asked you how to explain to her family what has happened to their spending. She has brought with her their family budget from last year, as well as their current budget for this year.
Identify one relevant economic concept that applies to the scenario and describe how it applies. (Question 1)
Summarize how expenditures changed between budgets. Make sure to address how expenditures changed (or did not change). (Question 2)
Describe the economic trends that created the need for a change in expenditures. Make connections to the economic concepts you have learned. (Question 3)
Explain the rationale for your friend’s budget decisions to her family. Address all changes (or non-changes) in expenditures and discuss long term effects. (Question 4)
Reflect on how changes in economic variables may impact your personal life and finances. (Question 5)