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Economic Choice & Economic Decision Making

Autor:   •  November 14, 2016  •  Coursework  •  1,404 Words (6 Pages)  •  807 Views

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Economic Choice & Economic Decision Making

Jason Sabol

ECO/561 Economics

October 31, 2016

Dr. Mark Erenburg


Economic Choice & Economic Decision Making

Purchasing a vehicle can be a very stressful time for anyone that is looking to upgrade their car or truck. However, many other factors come up when deciding what kind of vehicle is going to be your next car or truck. Factors such as what the cost of gas and interest rates come into play when deciding your next car purchase. By realizing the elements due to the state of the economy, it plays a part for many individuals when deciding what kind of vehicle to purchase.

At the time of purchase, I was about six months away from finishing my undergraduate studies and just started a job in my field of accounting. So there I was looking at a good paying job and wanting something that I could enjoy. At the time I knew that there might be consequences to pay if the job didn’t work out and they let me go, but sometimes that is the risk that people have to take. The economy at the time was in the middle of a recession, and I wasn’t looking for something that was fuel efficient vehicle or something that was good for the environment.

The last time that I made a purchase of a vehicle was back in 2011, but the costs of gasoline and interest rates on my loan were not that big of a factor when it came down to deciding. Going in I knew that I was looking to purchase a Ford Mustang, but I also knew that it didn’t necessarily need to be a brand new one. The average cost of gas was at an all-time high at $3.15 a gallon in the Cleveland area, but I knew my purchase was going to be a seasonal one that I would not drive all year round.

The circular flow model traces exchange value (purchasing power) around its repetitive cycle, back and forth between the two exchanging, decision-making units, one governing production (firms), and one governing consumption (households) (Daly, 1985). With the purchase of my vehicle, it had already been in the hands of one owner previously. So it had already been from dealership to owner and then bought by another dealership before the time of my purchase. Cars can sometimes change hands multiple times before purchasing by a household. The vehicle is purchased by one dealership, but if it fails to sell on one lot, it may go to a few dealerships before it is sold.

The particular section of the circular flow chart that pertains to the purchasing of a vehicle is the red rectangle product market. The red rectangle at the bottom of the diagram represents the product market, the place where the goods and services produced by businesses are bought and sold (McConnell, Brue, & Flynn, 2015). This is where the business sells and the household buys the product. The product which is the car is sold by the dealership to the household who is me the buyer. This particular Ford Mustang had been through the entire cycle of the circular flow chart because it has been sold to another buyer and then sold back to a dealership.

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