Answer to Question #297022 in Microeconomics for Harshita

Question

Twins Anna and Aayan are excited to be starting college next

year. Anna is leaving home behind and heading to college in Bangalore

while her brother Aayan is going to live at home and attend the local

university. Up till now they have always used cash or gift cards received for

holidays or birthdays to pay their expenses. Any savings they had was in

the piggy bank in their rooms. Now that college is almost there, they realize

that cash may not be the best option.

Required:

1. Why is cash not always a good option?

2. What should Anna consider when picking a bank? What about

Aayan? Do they have different needs?

Answer 1

Cash is not a good option because it is dirt, can be a target for thieves, and with cash, no interest is earned. When picking a bank, they should consider their needs for instance, since Anna is going far should consider a bank that can offer convenient and flexible services with minimal or low charges because most of the time, the bank will be used in transactions while AAyan should consider a bank that has also almost free to low rates because as a student you cannot sustain high rates of interests on bank transactions