ECON 1102 Lecture Notes - Lecture 6: Berkshire Hathaway, Warren Buffett, Franco Modigliani
Document Summary
Bridge the gap between savers and borrowers. Gather savings and allocate it to the most profitable investments. Saving - income that is not spent on consumption goods. Investment - purchases of new capital: tools, machinery, factories. Not defined by economists the same way as stockbroker defines investment. Whatever a consumer doesn"t save is consumed. Save during working years to provide for retirement. Save during the good times in order to ride out the bad times. Aids has lowered life expectancies in africa. Makes people consume for today rather than save. Time preference - the desire to have goods and services sooner rather than. Anything with immediate costs and future benefits must overcome time later preference. The greater the preference for things now, the smaller will be saving. Two ways of presenting a savings plan: Option 1: automatic enrollment in savings plan with ability to opt out. Option 2: employees must choose the savings plan, otherwise, they don"t participate.
