Da VIP Academy / GED / Social Studies / Economics
Personal Finance & Economic Choices
Apply budgeting, credit, interest, and opportunity-cost reasoning.
How it works
Opportunity cost
Every choice gives something up. The opportunity cost of spending $200 on tires is whatever else that $200 would have done — it is the next-best option, not all options.
Interest works both ways
Saving earns interest; borrowing pays it. Simple interest = principal × rate × time. Credit card balances compound, so a $1,000 balance at 24% grows fast if you pay only the minimum.
Worked examples
Simple interest on $1,200 at 5% for 3 years.
- I = P × r × t.
- 1200 × 0.05 × 3.
- I = $180.
Words to know
- Opportunity cost
- The value of the next-best option you gave up.
- Principal
- The original amount saved or borrowed.
Test-day tips
- • A budget question is usually just income minus fixed costs minus variable costs.