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© 2014 Pacific Crest
391
D
emonstrate Your Understanding
Apply it and show you know in context!
You may find the article “1901” interesting in a number of respects, but we will be looking at a typical
United States family budget from the turn of the (20
th
) century. Note that in this table, “Shares” means
“Percent.” All figures are annual (not monthly) amounts.
Table 5. Expenditures and expenditure shares, United States, New York, and Massachusetts, 1901
Item
United States
New York
Massachusetts
Expenditures Shares Expenditures Shares Expenditures Shares
Food
$327
42.5
$356
43.7
$367
41.7
Alcoholic beverages
12
1.6
24
2.9
6
0.7
Housing
179
23.3
191
23.5
263
29.9
Apparel and services
108
14
106
13
127
14.4
Health care and insurance
40
5.2
49
6.1
24
2.6
Entertainment
12
1.6
14
1.7
11
1.2
Reading and education
8
1.1
9
1.1
11
1.3
Tobacco
11
1.4
11
1.4
10
1.1
Miscellaneous
62
8.1
45
5.5
48
5.5
Religion and charity
10
1.3
9
1.1
13
1.5
Average income per family
750
100.1
675
100
685
99.9
Expenditures, all items
769
814
890
NOTE: Expenditure shares do not add to 100 due to rounding. SOURCE: U.S. Bureau of Labor Statistics, Consumer Expenditure Survey
1. We have calculated percents by dividing a particular expense by a family’s total income. How were
the percents (shares) calculated here?
2. What category/categories are important in today’s budgets that did not appear in a 1901 budget?
Why would they have been omitted in 1901?
3. What category/categories appear in 1901 that are not usually found listed in a current budget?
4. A large percentage of the budget was devoted to food in 1901. Why might this have been the case?
5. Food and housing accounted for 65.8% of the family’s budget. How much money did they have left
for all other annual expenses?
6. If a family today has an income of $75,000 instead of $750 but kept the same percentages in their
budget as in 1901, how much would the family spend on tobacco? On housing? On food? Are any
of these realistic amounts for a family budget today? Explain.
H
ardest Problem
How hard
can
it be? Can you still use what you’ve learned?
Based on the Models, the Methodologies, and the Demonstrate Your Understanding (DYU) problems in
this activity, create the
hardest
problem you can. Start with the hardest DYU problem in this experience
and by contrasting and comparing it with the other DYU problems, play “What if” with the different
conditions and parameters in the various problems. Can you still solve the problem? If so, solve it. If
not, explain why not.
What are the conditions and parameters that make creating a budget a difficult thing to do?
8.4 Budgeting