1. The Cost of Hanging Out Exploring and Representing Relationships 1 © Council for Economic Education

2. How much do you spend to hang out? How much money do you have to spend each month? Where does your money come from? What do you spend your money on? 2 © Council for Economic Education

3. Words to describe Income, Budget, Budget Constraint, and Trade-off Income: Budget: Budget Constraint: Trade-off: 3 © Council for Economic Education

4. Definitions Income: Payments earned by households for selling or renting their productive resources. May include salaries, wages, interest and dividends. Budget: A spending and savings plan, based on estimated income and expenses for an individual or an organization, covering a specific time period. Budget constraint: All the combinations of goods and services that a consumer may purchase given current prices within his or her given income. Trade-off: Giving up some of one thing to gain some of something else. 4 © Council for Economic Education

5. Pat & Sam Hang Out Pat has started hanging out with Sam. Sam loves fries and so Pat rides the city bus to Sam’s bus stop, gets off and walks to Sam’s house. Then Sam and Pat return to the bus stop and ride together to Freddy’s Fry Shack to sit and talk. 5 © Council for Economic Education

6. Bus Route 6 © Council for Economic Education

7. What else do you need to know? What else would you need to know to find out how much Pat needs to spend to hang out with Sam and go to Freddy’s Fry Shack? 7 © Council for Economic Education

8. More Information Each time Pat gets on the bus he must have a token. One token is $2.00. The small order of fries at Freddy’s Fry Shack is $1.00. How much will he spend on bus tokens for Sam and himself? _________________ How much will he spend on the fries for Sam and himself? _________________ 8 © Council for Economic Education

9. Combinations 20 18 16 14 12 10 8 6 4 2 0 02468 1214161820222426283032 9 © Council for Economic Education

10. Combinations 2040424446485052545658606264666870 1836384042444648505254565860626466 1632343638404244464850525456586062 1428303234363840424446485052545658 1224262830323436384042444648505256 1020222426283032343638404244464850 816182022242628303234363840424446 612141618202224262830323436384042 48101214161820222426283032343638 246810121416182022242628303234 0024681012141618202224262830 $024681012141618202224262830 10 © Council for Economic Education

11. Combinations 2040424446485052545658606264666870 1836384042444648505254565860626466 1632343638404244464850525456586062 1428303234363840424446485052545658 1224262830323436384042444648505256 1020222426283032343638404244464850 816182022242628303234363840424446 612141618202224262830323436384042 48101214161820222426283032343638 246810121416182022242628303234 0024681012141618202224262830 $024681012141618202224262830 11 © Council for Economic Education

12. What will 32 dollars buy? What equation could we write if x is the number of fries Pat buys and y is the number of tokens and the total must be 32 dollars? Price/fries Number of fries Price/token Number of tokens Total Spent $132$20$32 x y 12 © Council for Economic Education

13. What will 32 dollars buy? What equation could we write if x is the number of fries Pat buys and y is the number of tokens and the total must be 32 dollars? Price/fries Number of fries Price/token Number of tokens Total Spent $132$20$32 12822 32 12424 32 12026 32 11628 32 112210 32 1821232 1421432 1021632 1x2y 13 © Council for Economic Education

14. Graphing your combinations 14 © Council for Economic Education

15. Graphing Fries and Tokens 15 © Council for Economic Education

16. Can Pat Stay Within his budget? What does the point (6,10) on your graph represent? Can Pat purchase 10 fries and 10 bus tokens? How do you know? Can Pat purchase 10 fries and 20 bus tokens? How do you know? What is the equation of the line? 16 © Council for Economic Education

17. Price of Fries Increases to $2  How would the budget constraint line be transformed if the price of fries went up to $2? 17 © Council for Economic Education

18. Shift in Budget Constraints 18 © Council for Economic Education

19. How Many Hangouts? How many times can Pat hang out with Sam each month given Pat’s new budget constraints? 19 © Council for Economic Education