GCSE economics question

macaque_2

Question 2 (40 marks)

Mr Smith has a take home salary of £1000 per month. He is planning to buy a 2 bed flat which will cost £500 a month in mortgage repayments. In September he recieves notice from N&P power that prices are going to rise by £30 a month and from Thameslink that fares are going up by £40 month. He goes to his boss and asks for a 7% pay rise. His boss says "**** off, didn't you know we have a pay freeze and you are lucky to have a job at all sunshine".

a. Discuss what impact Mr Smith's chance of circumstances will have on his house buying negotiations.
b. Summarise the different types of inflation and their relationship to the housing market
c. Imagine you are Mr Smith and you have decided not to buy. Write a letter to your landlord and explain why you will be paying 7% less as of next renewal.





http://www.citywire.co.uk/money/chart-of-the-day-what-is-the-real-inflation-rate/a516457?re=15503&ea=174368&utm_source=BulkEmail_Money_Daily&utm_medium=BulkEmail_Money_Daily&utm_campaign=BulkEmail_Money_Daily

vivatifosi

He spends about £300 a month on fuel (depending on gas/electric percentages)? He'll probably be better off buying the two bed flat and not living in a lighthouse.

purch

a. Discuss what impact Mr Smith's chance of circumstances will have on his house buying negotiations.

I feel sorry for the teenagers of today, when they get GCSE questions with such obvious spelling mistakes.

Talk about dumbed down :eek:

macaque_2

purch wrote: »

I feel sorry for the teenagers of today, when they get GCSE questions with such obvious spelling mistakes.

Talk about dumbed down

Don't get snippy with me Purch! This is an Edexcel paper.

Loughton_Monkey

macaque wrote: »

Question 2 (40 marks)

Mr Smith has a take home salary of £1000 per month.

Fine. Assuming no deductions whatsoever, that means precisely £14,175 Gross. Wonderful.

macaque wrote: »

He is planning to buy a 2 bed flat which will cost £500 a month in mortgage repayments.

I'm warming to this guy. OK. What are we talking about? Three times salary? Boy! He qualifies for a £42,525 mortgage.

OK. I know what you're thinking. He's got the charm of the Irish. He's a good negotiator. He managed to get £50,000 mortgage didn't he? OK A bit far fetched, but I'm intrigued. Let's run with it.

Oh! But it's £500 a month? That's £6,000 a year. So he's paying 12% mortgage interest? I'm losing a bit of sympathy with this guy. Should have gone to moneysupermarket.com shouldn't he?

macaque wrote: »

In September he recieves (sic) notice from N&P (sic) power that prices are going to rise by £30 a month and from Thameslink that fares are going up by £40 month. He goes to his boss and asks for a 7% pay rise. His boss says "**** off, didn't you know we have a pay freeze and you are lucky to have a job at all sunshine".

As there's no such thing as N&P Power, I strongly suspect he's with NPower who have just announced a 15.7% rise. Phew! That means he pays £2,293 a year (assuming Gas). Well I sympathise with the guy. I just about pay that myself with my heated outdoor swimming pool. Can you tell me where this 2-bed flat is, that has a swimming pool? Sound a nice place to live.

Oh! And just another point. With fares rising 8%, then his £6,000 season ticket will certainly cost him another £40 a month. My advice to him would have been to buy his 2-bed flat a trifle nearer work. Wouldn't that make sense?

macaque wrote: »

a. Discuss what impact Mr Smith's chance of circumstances will have on his house buying negotiations.
b. Summarise the different types of inflation and their relationship to the housing market
c. Imagine you are Mr Smith and you have decided not to buy. Write a letter to your landlord and explain why you will be paying 7% less as of next renewal.

Dear Landlord,

I beg you to allow me to renew my rental at next renewal. I know I gave you notice, but I have this awful Financial Advisor called macaque who said that I would be able to buy a 2 bedroom apartment with swimming pool for £50,000 by now.

I have since learned that the poor chap has an affliction and cannot think things through. On the one hand he tells me I can get an apartment for £50,000 - which is the most I can get on my meagre salary of £14,175 - and on the other he tells me this is going to cost £500 a month! I think he lives in the past and believes mortgage rates are 12%. Mind you, he's well known for not knowing anything about house prices - 'property attention deficit' syndrome I think

Either way, I think he's a bit 'simple'. He was mumbling something about me paying £6,000 for my season ticket to work, but quite frankly I think he must have had his brain fried or something. I wanted to discuss it with him but apparently he's always writing complete garbage to some forum or other, foam and saliva dripping from his mouth, a hundred Estate Agents' magazines piled up on the side, dwarfed by a pile of declined mortgage applications that is even higher, and made sodden by months of tears.....

So can we just renew the rental contract and move on?

What are my marks? 39/40?

purch

What are my marks? 39/40?

As Macaque pointed out, this is an Edexcel paper.

You get 45 out of 40 :eek:

That equates to a B, as you need 49 for an A and 55 for an A*

Loughton_Monkey

purch wrote: »

As Macaque pointed out, this is an Edexcel paper.

You get 45 out of 40 :eek:

That equates to a B, as you need 49 for an A and 55 for an A*

OK. That's fine. I just needed 2 out of 40 to qualify for Skegness University. Honours degree at 'Macaque College' in Applied Stupidity. Can't wait for the 'Finals' exam.

PasturesNew

macaque wrote: »

a. Discuss what impact Mr Smith's chance of circumstances will have on his house buying negotiations.

He'll have to get a liar loan.

macaque wrote: »

b. Summarise the different types of inflation and their relationship to the housing market

The inflation where stuff costs more: he's fooked
The inflation where he earns more: he's fooked
The inflation of the individual asset class of housing: he's full of win

macaque wrote: »

c. Imagine you are Mr Smith and you have decided not to buy. Write a letter to your landlord and explain why you will be paying 7% less as of next renewal.

Dear LL

Sucks to be you. Place over the road costs £100/month less than you want, so it's your choice - I can move there and pay less, or stay with you if you rent match it.

Yours

Loughton_Monkey

PasturesNew wrote: »

The inflation where stuff costs more: he's fooked

Tick!

Congratulations.

You have now been awarded an Honorary Degree in Acarology at the Macaque Acadian Academy of Acapulco.

This qualifies you to start new posts every 15 minutes quoting vague figures, from which you can draw spurious conclusions, using faulted mathematics, and sum them up with sweeping statements which lead to the end of the house market as we know it.

You will be expected to conform to heirarchical 'social behaviour'

http://en.wikipedia.org/wiki/Macaque

Social behavior

Macaques have a very intricate social structure and hierarchy. If a macaque that is lower level in the social chain has eaten berries and there are none left for a higher level macaque, then the one higher in status can, within this social organization, remove the berries from the other monkey's mouth.

PasturesNew

Loughton_Monkey wrote: »

Tick!

You have now been awarded an Honorary Degree in Acarology at the Macaque Acadian Academy of Acapulco.

I got an ology!!

JonnyBravo

macaque wrote: »

c. Imagine you are Mr Smith and you have decided not to buy. Write a letter to your landlord and explain why you will be paying 7% less as of next renewal.

:rotfl:

I think you'll find he'll be paying 100% less.