Financial Management

Authors Name
Institutions Name

pg. 1

Contents
Part-A...............................................................................................................................................3
Farah Budget................................................................................................................................3
Changing of Preference................................................................................................................4
Unit Price Increases.....................................................................................................................5
Savings.........................................................................................................................................6
Part-B...............................................................................................................................................9
Introduction..................................................................................................................................9
Analysis & Discussion...............................................................................................................10
Conclusion.....................................................................................................................................13
References......................................................................................................................................14

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Part-A
Farah Budget
As per the scenario, Farah has a total budget of GBP 200. They have two different line of
products on which they are entitled to spend the money. Farah has classified the products into
essentials and treats. The graphs of the quantity that should have been taken into account for the
consumption purpose is as follows

Per Unit

Quantity

Amount in GBP

Essentials

20

160

Treats

40

Quantity

pg. 3

Essentials

Treats

Changing of Preference
Lets say now Farah has changed their preference and moving towards different
substitution of Essential and Treats through which they can easily ascertain their existence.
Considering the same factor, it may happen that more of the amount will be subjected to the
Essential item, if the appetite of the treat items can be overcome with the help of substitute
products.

Per Unit

Quantity

Amount in GBP

Essentials

20

180

Treats

20

Indifference Chart
Essentials

Treats
9

Old Quantity

Substitution Quantity

The difference among the quantities can be easily found and predict. The old Quantity is
8 for each of the products, while it moved to a level of 9 from 8, showing an indifference
quantity of 1 in the essential item. On the other hand, the Treat Quantity has decreased to 4 from

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8, showing an indifference quantity of 4, as the individual has moved towards the substitutions in
terms of Treating.
Unit Price Increases
This particular part of the assignment is revealing that the unit price of the essential and
treating product has increased from GBP 20 to 40. It is likely to analyse the impact of the same
price change over the quantity demanded of the products in terms of essential and in terms of
treating as well. The consumption table is as follows

Per Unit

Quantity

Amount in GBP

Essentials

40

160

Treats

40

Quantity

8
7
6
5
4
3
2
1
0

Essentials

Treats

This particular income effect has a strong connection with the changing in the quantity in
terms of Essentials as well as Treating. This particular factor would be highly effective and
essential that induced the consumer to move towards more Treat Products as compared to the
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Essential one because of the change in the income from 20 to 40 for the essential product. It
means that the consumer will like to consume fewer essential products, and move more towards
the treating base products.
Savings
It is assuming that Farah has received a total income of 2,400 per year, and she started to
save all the income. This particular factor is likely to make the diagram in the cases of Patient
and Impatient
a. Patient

4687.5
3750
3000
2400

In terms of being consistent, the individual has the tendency to increase the amount by
25% each year. It was GBP 2,400 in the first year, which is expected to reach on the level of GBP
4,688 in the end of the year 4.
b. Impatient

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4
4
4

3906.25

3
3
3

3125

2
2
2

2500

1
1
1
0

2000
500

1000

1500

2000

2500

3000

3500

4000

4500

c.

This particular aspect is clearly showing that the amount of savings will decrease in the impatient
aspect as compared to the patient one.

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Part-B
Introduction
Alfred Marshal and Adam Smith, who have been referred as the Father of Economics
(FOE) have revealed the most basic, but widely used definition of the term Economics.
According to them Economics is the name of earning and consuming the money efficiently. In a
broad nutshell, the term and verdict of economics can be divided into two main sections, which
are Microeconomics and Macroeconomics. By definition, microeconomics is a type of
economics that associated with the decision making of the individuals, while Macroeconomics is
a branch of economics that associated with the decision making for the entire economy (Arzac
2004).
There are numerous concepts underlie in each of the branch of economics, and its
importance is marvellous. Household decision making is one of the major aspects that stride
under the umbrella of Microeconomics, in which the individuals are more likely to take decisions
accordingly. The stance of Decision making is very significant in the entire field of Economics
and Management, and the existence of the same aspect is essential from different standpoint
(Benninga 2008).
It is a common saying that Households improve the outcomes in a much effective manner
as compared to living for oneself. It means that the Household Decision making is comparatively
better than the individual decision making stance. The main objective of this assignment is to
examine the same statement with the help of strong arguments and theoretical perspective. This
particular part of the assignment is related to the discussion of the same, which is divided into
three main aspects such as introduction, analysis & discussion and conclusion.

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Analysis & Discussion

Inevitably, the stance of decision making is very important both, for the individuals and
for the organisations as well. The more effective and versatile the decision making aspect of a
company, the more efficient will become the future in a pertinent manner. Most of the individuals
and organisations throughout the world are now maximising their effectiveness with the help of
effective decision making. However, this particular assignment is more concerned with the
decision making pertaining to the individuals.
One of the major things that stride under the context of Decision Making is related to
Household Decision making. According to Baker and English (2011), Household can bring more
suitable and efficient decision as compared to the decision taken for oneself. According to Cadle
et al. (2014), Household means to see the entire house with a single eye, while the concept of
Household Decision making is related to having an idea about the decisions to be taken to
strengthen the Household Function in an efficient manner. In a broad nutshell, the importance of
Household Decision Making is very broad, as it gives the opportunity to an individual of the
household to take right decision at the right time to make things operational accordingly. In other
words, Household Decision influences on the rationale of taking decisions that suited the best for
the entire household and their individuals. Considering the statement which has been stated in
the introduction, I, as a researcher fully endorse with idea Household Decision making in terms
of providing better results than oneself. There are three main aspects that make the Household as
a better outcome as compared to individualism, and the same are likely to discussed here
Involvement of Family Member in Decision Making

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The members of the family deem highly significant from the viewpoint of a Family. In
fact, without the members, it is not possible for a family to be completed. Decision making
pertaining to a family has been taken to its in-line benefits to each of the individual related to the
Household. One of the main line of importance of Household Outcome is that it involves specific
amount of the Family Members in the Decision Making Aspect (Easton, et al. 2010). This
particular factor deems highly efficient and productive from the standpoint of an organisation.
Sheer involvement of the Family Member in the decision making aspect not only enhances the
value of the pertaining decision, but also increases the existence of transparency in the decision
making aspect. Proper decision making of an individual will be beneficial only, if it has the
tendency to provide equal amount of benefits and well-being to every single user or the
households (Easton, et al. 2010).
Considering the same factor, it can be said that Household brings more efficient and
positive outcome as compared to Individualism, and this is the main rationale that induced the
Households to use the same factor in terms of their core decision making. Family members can
easily analyse their necessity accordingly with the mutual understanding, and they can decide
about the concerned person who may involve in the decision making aspect (Easton, et al. 2010).
This particular aspect is increasing the importance of Household Decision Making in all over the
world as compared to the individual factor for a society, and the appreciation of this idea would
be highly efficient and material for a society to have specific well-being.
Nature of Family Members in Decision Making
The members of the family deem highly significant from the viewpoint of a Family. In
fact, without the members, it is not possible for a family to be completed. Decision making

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pertaining to a family has been taken to its in-line benefits to each of the individual related to the
Household. One of the main line of importance of Household Outcome is that it involves
Different Nature of Family Members in the Decision Making Aspect (Frayer and Uludere 2001).
This particular factor deems highly efficient and productive from the standpoint of a Household.
Sheer involvement of the Family Member pertaining to different nature in the decision making
aspect not only enhances the value of the pertaining decision, but also increases the existence of
transparency in the decision making aspect. Proper decision making of an individual will be
beneficial only, if it has the tendency to provide equal amount of benefits and well-being to every
single user or the households.
Considering the same factor, it can be said that Household brings more efficient and
positive outcome as compared to Individualism, and this is the main rationale that induced the
Households to use the same factor in terms of their core decision making. Family members can
easily analyse their necessity accordingly with the mutual understanding and according to their
changing nature and behaviour, and they can decide about the concerned person who may
involve in the decision making aspect (Kendall and Rollins 2003). This particular aspect is
increasing the importance of Household Decision Making in all over the world as compared to
the individual factor for a society, and the appreciation of this idea would be highly efficient and
material for a society to have specific well-being. Family members pertaining to different nature
can help each other in analysing and understanding different things at the same time.
Family Role Structure and Decision Making Strategies
Strategies deem highly important for the organisations as well as for the individuals. It
not only helps the professionals to analyse the main rationale behind the decision making aspect,

pg. 11

but also helps them to get engage with sheer productivity. Household provides the opportunity to
each of the family members to suggest the others according to their understanding. In other
words, each of the family member has the idea about their specific role in the market through
which they can enhance their decisions accordingly (Hitchner 2010). The more efficient the
decision making strategies, the brighter will be the likelihood of maximising the potential of the
decision making.
One of the main rationales behind the effective outcomes due to Household as compared
to individualism is the family role and proper strategies that can help them to have the most out
of it. Household testifies and improve the role of the family structure, and strengthen the decision
making aspects through which the stance of taking timely and effective decisions will be in the
upright and efficient position (Hitchner 2006). Hence, it can be said that the Household brings
better outcome than the individual oneself, due to the main aspects that discussed in the main
body of the assignment.
Conclusion
Households improve the outcomes in a much effective manner as compared to living for
oneself. It means that the Household Decision making is comparatively better than the individual
decision making stance. The main objective of this assignment is to examine the same statement
with the help of strong arguments and theoretical perspective. This entire assignment is based on
the same provision which founds that Household Decision making is more suitable and
beneficial as compared to oneself. There are three different reasons cum rationales have already
discussed to support the same idea completely.

pg. 12

References
Arzac, E.R., 2004. Valuation for mergers, buyouts and restructuring.
Benninga, S., 2008. Financial modeling. MIT Press Books, 1.
Bennett, J. and Blamey, R. eds., 2001. The choice modelling approach to environmental
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BarndorffNielsen, O.E. and Shephard, N., 2001. NonGaussian OrnsteinUhlenbeckbased
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Baker, H. and English, P. (2011). Capital budgeting valuation. Hoboken, N.J.: John Wiley &
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Cadle, J., Eva, M., Hindle, K., Paul, D., Rollason, C., Turner, P., Yeates, D. and Cadle, J.
(2014). Business Analysis. Swindon: BCS Learning & Development Limited.
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Kendall, G. and Rollins, S. (2003). Advanced project portfolio management and the PMO.
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Hitchner, J., 2006. Cost of capital/Rates of return. Financial Valuation: Application and Models.
Mercer, Z., Harms, T. and Mercer, Z. (2008). Business valuation. Hoboken, N.J.: John Wiley &
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