Consumer’s Dilemma 2.0

Part A: Setting the Scene

1) Roll the pair of dice, multiply the total by 10,000, and write that number on the first line of your Response Sheet.

This will represent your annual household income, and you can then divide by 12 to calculate your monthly household income. It is your choice as to whether or not you would like to share this amount with others.

If you have rolled less than a combined total of 4, then roll again.

2) What is the size of your family (those living in the same household)?

Write that number on line 2 on your Response Sheet.

3) What type of car do you have, what is its gas mileage, and what is the current price for a gallon of gasoline?

Record this on line 3 of your Response Sheet.

4) Now that your annual salary has been determined it’s time to get settled into a home. Here you have five choices listed below.

Once you have made you selection, write it down on line “3.A” of your Response Sheet and indicate on line “3.B” the reason for your selection.

Remember, you cannot obtain a dwelling that is greater in annual cost than is your annual income.

I) Sizable (5 acres) rural, wooded lot with large, new house (5 bdr, 2 baths, 2 car garage)

Daily work commute = 75 milesCombined utilities = $500Annual mortgage = $30,000 with monthly payments of $2,500

II) Small lot in an established semi-suburb with a “cozy” house (3 bdr, 1 bath)Daily work commute = 75 miles Combined monthly utilities = $275Annual mortgage = $10,800 with monthly payments of $900

III) Sizable urban lot with new, large house (5 bedrooms, 2 baths, 2 car garage)Daily work commute = 10 milesCombined monthly utilities = $500Annual mortgage = $45,000 with monthly payments of $3,750

IV) Small urban lot in an established neighborhood in a “cozy” house (3 bdrms, 1 bath)Daily work commute = 10 milesCombined monthly utilities = $275Annual mortgage = $16,800 with monthly payments of $1,400

V) Small urban apartment (2 bdrms, 1 bath, no garage) Daily work commute = 10 milesCombined monthly utilities = $275Annual rent = $10,800 with monthly payments of $900

5) Calculating your monthly expenses.

A)Multiply your daily commute miles by 20, divide by the mpg of your vehicle, and multiply by the current cost per gallon of gasoline (line 3). Record that number on line “5.A”.

(Monthly commuter miles / mpg) x $/gallon of gas = Work Related Transportation Cost

B) For each additional person (other than you) in your household, add an additional 15% to the total monthly utility cost, and write that amount on line “5.B”

([Base Monthly Utility Cost] x 0.15) x # of additional persons) + Base Monthly Utility Cost = Total Monthly Utility Expenditures

C) Multiply the number of people in your household by 200 and record on line “5.C”. This will represent your average household food expenditure.

D) Now add all these numbers (A-C) and write your Monthly Household Expenditures on line “5.D”

Part B: Life Goes On

September Food purchases: Everyone must be fed, so let us now consider the general preferences of those in your household and look at the following categories of eating habits:

I) 0-20% composed of fresh vegetables- 0% increase in monthly food bill

II) 21-50% composed of fresh vegetables- 8% increase in monthly food bill

III) 51-80% composed of fresh vegetables - 12% increase in monthly food bill

IV) 20-50% of items consumed are locally purchased- 16% increase in monthly food bill

6) Which of the generalized preference categories listed above best reflects those of your household?

A) Write your response on line “6.A” on your Response Sheet.

6.B) Now calculate what your household’s food expenses will be and record that on line “6.B”.

C) Monthly Accounting: Calculate your month’s household finances.

OctoberYou belong to a community-owned electric company, and one of the coal-fired generation plants is nearing the end of its life cycle and will need to be replaced. All members are asked to vote on whether they would like to have the old generator refurbished or to have an array of wind-powered generators to make up for the lost capacity.

Your choice:

A: Refurbishment of the coal-fired generator will result in a small increase of 3% in your electricity costs, which will result in an increase of 1% in utility costs.

B: Replacement of the old generator with an array of wind generators is more expensive and will create an increase of 6% in electricity costs, which will result in a increase of 3% in utility costs.

7) Making a decision: A) Which do you chose? Circle your selection on line “7.A” of your Response Sheet.

B) Explain why you made the choice you did.

7.C) Now it is time to take a survey of the group to see what course of action has been selected.

7.D) Calculate the increase in your household utility costs in accordance with the choice made by the group.

E) Monthly Accounting: Calculate your month’s household finances.

NovemberThe Collective Costs: Now it is time to take stock of the effects of the group member’s decisions. First, let us consider the food preferences and determine the number within each category.

Write the figures for each on your Response Sheet for “8.A” to “8.D” and do the calculations following each category. Total the second column and record on line “8.E”.

What do these numbers mean? They reflect the net “externalities” associated with each of the respective diet types.

A diet like category I not only has a higher food-chain entropy effect (decrease in useful calories with a move up the food chain), but it also requires greater processing, packaging, and transportation costs.

Some of the effects of this include an increase in the cost of energy as demand grows at a rate at which supply cannot keep up and an increase in health care costs and insurance as poor diets lead to poor health.

Eating locally raised, healthy foods is the best way to counter these affects.

Despite your personal dietary choice, those of your neighbors do have an affect on the total energy demand and the collective cost of healthcare.

So, that number on line “8.E” of your response sheet must be calculated into your budget. The fist way will be the effect to your transportation bill.

Take 25% of that number from “8.E” (E x 0.25) and write that on line “8.F” as additional cents per gallon to include in your transportation cost.

Use your calculation figures from “5.A” but reflect the increased price of fuel. Record your new monthly transportation cost on the appropriate spot on “8.J”.

Now we will consider the healthcare cost of everyone’s dietary choices.

Take that same number from line “8.E” and multiply by 1.25 and then write that number on line “8.G”. Now, take that number and subtract it from your monthly salary and record that on line “8.H”.

Everyone knows that your are what your eat, so those with a healthier diet will likely have fewer visits to the doctor and not be required to pay out for insurance deductibles.

So, using the list scale below, readjust your monthly salary to reflect your dietary choice and place your again re-adjusted monthly income on the appropriate spot on “8.J”.

I) No increaseII) Add $100III) Add $200IV) Add $250

Calculate your month’s household finances for “8.J”.

DecemberRoll the Die: One person in the group will need to roll one die, the result of which is likely to impact all in the group.

Calculate your monthly finances according to the scenario dictated by the roll of the die. Record this on line “9” of your Response Sheet.

I Nothing changes. The world has equilibrium and stability

II The redirection of corn toward biofuels causes a scarcity in this grain (thus increasing its economic value) and a loss of land for food production (again increasing scarcity and prices), the effect of which is a 10% increase in everyone’s food expenses.

III Rather than simply being an oil exporting nation, Saudi Arabia decides to use more of its dwindling supplies for its own industries and living comfort and cuts its sales in half. This affects the price of everything. Everyone’s expenses increase in the following way:

Transportation – 35% Utilities – 25%

Food – 30%

IV The Ogallala Aquifer, which supplies nearly all the irrigation water to the United States’ Bread Basket, becomes over-depleted and too saline and the wheat crop fails. Simultaneously, a disease destroys the rice crops of Southeast Asia. The price of both of these staple foods skyrocket, and everyone’s food bill increases 15%.

V Alaska’s decides to take ownership of its natural gas and to manage its distribution throughout the state. All utility bills in Alaska decrease by 15%.

VI Climate change has increasingly acidified the oceans to the point where salmon runs dramatically decrease, thus heavily damaging the commercial fishing industry in Alaska, which damages the overall economy of the state. This is reflected in a 10% decrease in everyone’s monthly salary.

Part C: Your Suggestions on Improving this ExerciseJanuary

Community Meeting?February

Scenario?March

Collective Costs?April

Scenario?May

Roll the Die? June

Scenario?July

Scenario?August

Collective Costs?

What are your thoughts on the usefulness of this exercise?

What are its good points and bad points?

Create an additional scenario such as was done for September and October.

Be sure to also list the “Collective Costs”, as was played out in November.

Create two “Roll of the Die” scenarios.