Chapter 10 notes Economics 02/05/2007 12:53:00

Ch 10
Production- takes time
• rely on money made from previous years to continue production
• investment= time and money
o must weigh opp. Cost of new product
• Consumption- time
o Am. Value present consumption over future consumption
 EX: one hour photo. (pay more to get right away)
o Loan- Present consumption
o Intrest- percentage of what you borrow
 20,000  5%
 21,000
o IR low- Loan demand goes up
• Diversify – to take out from other peoples money deposited
• Credit- your ability to borrow
• Risk
o Prime rate (lowest interest rate possible)
 Large businesses
 Perfect credit
• Collateral- asset that bank holds until loan paid
o EX: house