Louisiana: The History of an American State Chapter 3 Louisianas Economy: Resources and Rewards...

Louisiana: Louisiana: The History of an American StateThe History of an American State

Chapter 3Chapter 3

Louisiana’s Economy: Louisiana’s Economy: Resources and RewardsResources and Rewards

Study PresentationStudy Presentation

©2005 Clairmont Press

Chapter 3Chapter 3Louisiana’s Economy: Louisiana’s Economy:

Resources and RewardsResources and Rewards

Section 1: Section 1: Basic Economic ConceptsSection 2: Section 2: Louisiana’s Economic HistorySection 3: Section 3: Louisiana’s ResourcesSection 4: Section 4: Providing Louisiana’s Goods and Services

ESSENTIAL QUESTION:

–How do people satisfy their wants and needs in our economic system?

Section 1: Basic Economic Section 1: Basic Economic ConceptsConcepts

Section 1: Section 1: Basic Economic ConceptsBasic Economic Concepts

What words do I need to know?1. goods 2. services3. consumer4. producer5. natural resources 6. human resources 7. capital resources8. scarcity

Section 1: Section 1: Basic Economic ConceptsBasic Economic Concepts

9. opportunity cost

10. supply

11. demand

12. profit

13. traditional economy

14. command economy

15. market economy

Wants and NeedsWants and Needs

• goods: physical items – food, clothing, cars, housing, etc.

• services: activities people do for a fee

• producer: person or business – makes goods or provides a service

Resources and ScarcityResources and Scarcity

• natural resource: gift of nature – part of the natural environment, - water, trees, minerals

• human resources: people – those who produce goods & provide services

• capital resources: money & property – used to produce goods and services

• scarcity: available resources – demand greater than supply

Making Choices

• Scarcity vs. producers & consumers

• Unlimited needs vs. wants

• Limited resources vs. limited amounts of goods & services

• Basis of an economic system – choosing how to use resources

• Those making choices in United States – individuals, businesses, & communities

Costs and Benefits

• Opportunity benefit– Choices (getting a job vs. going to college)– Immediate salary vs. getting an education

• Opportunity cost – cost of choice not taken

• Other choices of opportunity benefits & costs– Using resources or using time– Value of non-chosen alternative

Trade-Offs

• Either/or choice: not always the best

• May combine parts of choices as trade-off

• Trade-off choices to get wants & needs

Supply and Demand

• supply: quantity of a good or service offered for sale

• demand: quantity of a good or service consumers are willing to buy– Lower prices: consumers buy more,

producers make less $ per item– Higher prices: consumers buy less,

producers make more $ per item• profit: amount left after costs are

subtracted from price (motivator for producers)

Basic Economic Questions

Four basic economic questions: 1) What do we produce?2) How can it be produced?3) How much will it cost to produce?

4) For whom will we produce?

What to Produce

• Making the necessary decisions–Meeting needs & wants

–How to make the capital resource (money)

–Human resources

–Natural resources

• Finally, deciding what to produce

How to Produce

• Plan of action:– How to carry out plan

– Process of implementation

– Supplies needed

• Overall production schedules:– When to start production

– When to end production

How Much to Produce

• Items to consider for plan–Time involved –Resources needed–Market demand for product (s)

and/or service (s)

• Decisions affected by scarcity

For Whom to Produce

• Develop knowledge of consumers

• Study needs of consumers

• Consider supply & demand

• Analyze & plan for competitors

• Consider advertising

Economic Systems

• economist: one who studies the economy

• Three basic kinds of economies 1. Traditional Economy

2. Command Economy

3. Market Economy

• Economy may function as combination

of all three

Traditional Economy

• Customs, habits, & beliefs determine and answer the four basic economic questions

• Continues in the way it has always been done

Command Economy

• The government … controls the economy answers the four basic questions makes the decisions has power & authority negotiates input & output controls competition

Market Economy

• Individuals… Answer the four basic economic

questions based on supply & demand

Also known as free enterprise Based on private ownership Freedom of choice

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Section 2: Louisiana’s Section 2: Louisiana’s Economic HistoryEconomic History

ESSENTIAL QUESTION:–What were Louisiana’s early

economic systems?

Section 2: Louisiana’s Section 2: Louisiana’s Economic HistoryEconomic History

What words do I need to know?1. barter2. mercantilism3. smuggling4. indigo5. tobacco6. commerce

Louisiana’s Economic Louisiana’s Economic HistoryHistory

• 1st economic system: barter (trading goods & services without money)

• Then mercantilism: command economy controlled by the government

• Next, smuggling: illegal trade with colonies of other nations

Louisiana’s Economic Louisiana’s Economic HistoryHistory

• Louisiana Purchase: – end of colonial period – end of earliest crops tobacco & indigo– beginning of agricultural market

• New market: sugar cane & cotton • New Orleans:

– became a major port for North America – 1801 described as “the grand mart of

business, Alexandria of America”

Louisiana’s Economic Louisiana’s Economic HistoryHistory

• Early years of statehood: a continuing agricultural economy

• 20 years before Civil War: a booming economy

• End of Civil War till after WWII: a struggling economy

• Growth and survival of war-developed industries

Louisiana’s Economic Louisiana’s Economic HistoryHistory

• New equipment & machines brought by technology

• Human labor replaced by machines

• Many farms deserted by workers

• 1880 – 1920: most old growth trees cut or gone

Louisiana’s Economic Louisiana’s Economic HistoryHistory

• Oil (another resource)

– Became valuable in early 20th century

– Economy base changed by new industry

– Agricultural economy changed due to WWII & demands for oil

– New economic direction: interdependent global economy

– 21st century: seeks diversity & less dependence on oil industry

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Section 3: Louisiana’s Section 3: Louisiana’s ResourcesResources

ESSENTIAL QUESTION:–What roles do natural resources,

capital resources, and human resources play in the economy of Louisiana?

Section 3: Louisiana’s Section 3: Louisiana’s ResourcesResources

What words do I need to know?

1. mineral resources

2. nonrenewable

3. lignite

4. biological resources

5. renewable

6. pulpwood

7. labor union

Natural ResourcesNatural Resources

• Economy supported by abundant natural resources

• Examples: air, water, & rich soil

• 21st century: agricultural shift from small farms/plantations to huge agribusiness systems

• Fewer people on farms

• Amount of crops not decreased

Natural ResourcesNatural Resources

• State ranking: 2nd in sugar cane & sweet potatoes

• Vital crops: rice, cotton, soybeans • Soil & climate good for raising beef &

dairy cattle (dairy farming diminished)• Abundant water supply good for

agriculture, industry, human use, transportation, & recreation

Mineral Resources

• Oil

• Natural Gas

• Salt

• Sulfur

• Lignite

Mineral Resources

• minerals: inorganic substances formed by Earth’s geological processes

• Important to Louisiana’s economy• nonrenewable: not replaced by nature

once extracted (taken) from the environment

• Mineral resources found in Louisiana oil (“black gold”), natural gas, salt, sulfur, lignite

• Construction resources in Louisiana sand, gravel, limestone

Oil

• Oil for today’s energy created by decayed plants from millions of years ago

• 10% of US oil reserves in Louisiana

• Louisiana: one of top oil-producing states in United States

• 1901 – 1st oil well in Louisiana

• 1947 – 1st platform in Gulf of Mexico

• More oil deposits beneath Gulf of Mexico

Natural Gas

• Larger deposits than oil

• ¼ of the nation’s supply

• 1st burned as waste

• 1917: “carbon black” developed

–used in making tires, ink, & more

• Important energy for homes & industry

Salt• Needed for human & animal survival• Used by Native Americans in trade• A form of money, later• Relied on by the Confederacy during

the Civil War• Used in chemicals & other products

–polyvinyl chloride plastic –PVC pipe for plumbing

Sulfur

• Major ingredient in:

• matches, gunpowder, medicine, plastic & paper

• 1869 – “richest 50 acres in the world”

• town of Sulphur in Calcasieu Parish

• Decrease in value

• foreign import changed importance

• unprofitable to mine in Louisiana

Lignite

• Soft, brownish-black coal

• Burns poorly

• Mined since 1970s

• Found mostly in DeSoto Parish

• Used for electric power station near Mansfield

Biological ResourcesBiological Resources

• Biological resources– Common term: plants & animals– Scientific term: flora & fauna

• renewable: replenish over time

• Main divisions:– Forests– Wildlife – Fish

Forests

• 50% of Louisiana in forests

• 2nd largest income producer

• 90% pine trees

• 75% trees cut for pulpwood

• Large trees cut for sawtimber

Forests

• Hardwood sawtimber used for furniture & flooring

• Paper mills, lumber mills, & plywood plants

• Christmas tree farms started by the Office of Forestry in the LA Dept. of Agriculture

Wildlife

• Variety of wildlife–History of trapping & hunting tradition

• Economic resourcesFur pelts: –Once sold more than a million pelts

annually

• Hunting regulations–State Department of Wildlife and

Fisheries

Wildlife

• Hunting• Source of food

• Recreation

• Millions of dollars for state’s economy

• Timber cutting• Reduced forest land

• Forest animals decreased

• Increase in recent years

Wildlife

• White-tailed dear –Population has increased

• Black bear–Largest wild animal in Louisiana–Endangered: not legal to hunt

• Wild turkey–Classified as a game bird–Efforts have been made to increase

its numbers

Wildlife

• Dove

• Quail

• Migratory waterfowl

• Alligators 1963: placed on the federal protected

species list 1981: hunting under strict rules Millions of dollars in hides & meat

Fish (Recreation)

• Freshwater bream, bass, perch, catfish

• Game fish: –trout, redfish, drum, mackerel, blue

marlin, amberjack, grouper, & tarpon (illegal to sell commercially)

Fish (Commercial)

• Crawfish raised on crawfish farms

• Catfish sold: freshwater & farms

• Commercial fishing: tuna, sea trout, red snapper

Capital ResourcesCapital Resources

• Human-made products used to produce goods or services

• Examples: rice mills, sugar refineries, oil refineries, cotton gins, & meat-packing plants

• Others include: transportation facilities – bridges, highways, & airports

Human Resources• People who supply the labor

– Physical or mental– Paid for goods or services

• Requirements– new skills & specialization – education & training

• Labor unions – workers’ organization to protect workers’ rights

• 1976 – right-to-work law passed – workers could not be forced to join a union

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Section 4: Providing Section 4: Providing Louisiana’s Goods and Louisiana’s Goods and

Services Services

ESSENTIAL QUESTION: –What is Louisiana’s place in the

global economy?

Section 4: Section 4: Providing Louisiana’s Providing Louisiana’s

Goods and ServicesGoods and Services What words do I need to know? 1. private goods & services 2. public goods & services 3. interdependent 4. Superport 5. tariff 6. economic indicators 7. gross domestic product (GNP) 8. consumer price index 9. inflation 10. unemployment rate

Providing Louisiana’s Goods Providing Louisiana’s Goods and Servicesand Services

• free market: private goods & services• Limited services & benefits to the

owners• Provided by the government: public

goods & services• Usually available to everyone

– highways, police, education, libraries

Louisiana-made goods include… • Ships, trucks, electrical equipment, glass

products, automobile batteries, & mobile homes

• Chemicals industry– Ranks 2nd in USA– Petrochemicals (chemicals made from

petroleum) – More than 100 chemical plants in LA– Fertilizers & plastics

ManufacturingManufacturing

ManufacturingManufacturing

• Billions of gallons of gas from petroleum refineries each year

• Shipbuilding –transport ships & merchant

vessels–Coast Guard cutters, barges,

tugs, supply boats, fishing vessels, & pleasure craft

Aerospace and AviationAerospace and Aviation

• Louisiana workers part of the United States space program

• Space shuttles assembled in New Orleans

• Lake Charles aircraft assembly for military use

BiotechnologyBiotechnology

• Combines biological research with engineering

• Pennington Biomedical Center leader in research

Service IndustriesService Industries• Adds billions of dollars to the economy• Tourism

– sightseeing– eating– shopping– fishing & hunting– Mardi Gras

• Movie-making– 1908 – 1st film made in Louisiana– 1917 – 1st Tarzan film made– More recent – “Steel Magnolias”

Economic InstitutionsEconomic Institutions

• Joint effort to produce & sell goods and services

• Groups known as economic institutions

• Include– Businesses large and small– Corporations: owned by investors, banks, &

labor unions

• Banks important: allow producers & consumers to trade, save, & invest

Louisiana in the U.S. and Louisiana in the U.S. and Global EconomiesGlobal Economies

• 1st economic systems: simple barter economies

• Today’s systems interdependent– overlap

– producers & consumers rely on each other

• Louisiana’s offshore port: Superport

Trade Policies

• North American Free Trade Agreement (NAFTA) changes trade policies & agreements

• Trade restrictions removed• Foreign countries offer cheap labor abroad• Companies moving abroad• Tariffs lessened• Imported goods & low prices hurting

Louisiana

Measuring the EconomyMeasuring the Economy

• Economic indicators

• Gross domestic product

• Consumer price index

• Inflation

• Unemployment rates

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