■ Hi! My name is Stan and today I am going to teach you about economics. Economics is the study of the making, buying, and selling of goods or services.

WHAT IS A NEED?• We all need 4 basic things:

1. Food2. Water

3. Clothing

4. Shelter

WHAT IS A WANT?–Everything beyond our four

BASIC NEEDS are wants.

Can you name some of your wants?

What does barter mean?

■These days people usually use money to get what they want. Before there was money, people had to barter to get what they wanted. To barter means “to trade”.

■ Some people were good hunters, some were craftsmen, and some were farmers. One person might have traded 1 sheep for milk and eggs. Eventually people wanted something smaller to carry around as money. People started using coins, as well as paper money for trade.

Want to trade with me?

■ Yesterday, when I was walking through town, I decided to go to “Bubba’s Ice Cream”. My friend Diana works there. Diana provides a service to me because she serves me ice cream. A service is any kind of work performed for others. The ice cream is a good. A good is something you can feel, or any kind of merchandise.

Bubba’s Ice Cream

■ Look at the pictures on the right. Which of these pictures show goods and which ones show services?

1)

2)

3)

4)

■ I asked Diana for a double scoop of my favorite kind of ice cream: mint chocolate chip. “I am sorry Stan, we are all out of that flavor”, she said. Disappointed, I settled for vanilla.

I’m sorry Stan!

What is supply and demand?■ The supply – (The

amount or quantity of a good. ) of mint chocolate chip ice cream at “Bubba’s” was gone because it was in high demand (wanted) by many customers. Look at the chart on the left to see what flavors are in supply at “Bubba’s Ice Cream”.

0102030405060708090

100

Gallons

vanilla choc. straw. mintchoc.

Flavors

■ Diana asked me if I would like my vanilla ice cream in a cup or a cone. I asked for a cone. Diana said I was lucky because there was only one more cone available. The little boy behind me in line wailed, “I wanted my ice cream in a cone!” I told Diana that he could have the last cone, and that I would have mine in a dish with chocolate syrup.

■ There was a scarcity of cones at Bubba’s. Scarcity means that there are limited resources, and therefore, people must make choices. Look at the pictures on the right. Which pictures show a scarcity?

1)

2)

3)

After I finished my ice cream, I said goodbye to Diana and left. In the street I heard two children singing a song to the tune of “You Are My Sunshine”. It went like this:

■ “We are consumers! We are consumers! We are so happy when we can shop! We are consuming goods and services, But our wants just will not stop!”

I found myself singing along to the tune. When we were finished singing I asked, “Where are you two going?”

■ The boy, whose name was Andy, answered: “We’ve saved up all our money and today we are going to the toy store! My sister Sara wants to buy either a rabbit or a bike and I want to buy either a basketball net or a skateboard”.

Toy Store

What are producers and consumers?

■ The two children in this example are consumers. A consumer is anyone who buys a good or a service.

■ The toy store owner in this example is a producer. A producer is anyone who makes or grows a good or performs a service.

What is opportunity cost?■ Andy had $65.00

to spend at the toy store. The basketball net cost $50.00, so he had to buy that instead of the skateboard, which cost $75.00.

■ Sara had enough money for either the rabbit or the bike. She decided to buy the bike because then she could ride bikes with her friends after school.

■ Opportunity cost is

the process of choosing one good or service over another. The item that you don’t pick is the opportunity cost. The rabbit is Sara’s opportunity cost and the skateboard is Andy’s opportunity cost.

Opportunity Costs

Purchases

What is a profit?■ What Andy didn’t realize when he

bought his basketball net was that the toy store owner made a large profit off of the sale. The toy store owner spent $30.00 to make the basketball net. Andy bought it for $50.00. The toy store owner made a profit of $20.00.

What is a loss?

■ The toy store owner lost money when Sara purchased the bike. The owner made the bike for $80.00, but sold it to Sara for only $65.00. The toy store owner lost $15.00.

After the children left the toy store I decided to stay and have a look around. In the front of the store there was a magnificent toy car.

■ “Wow”, I exclaimed, “what a neat car! Did you make it yourself?” The toy store owner explained that it was designed by a car company, put together by Mattel, a toy company, and painted by himself. “Painting is my specialty”, he said.

What is specialization?■ The toy store owner counted on

others to do the necessary work to construct the toys he sold, but then he would paint the toys himself. Specialization is when an individual or a company specializes in doing one part of a task, and relies on others to complete the other parts.

What is interdependence?

■ Interdependence is when people depend on one another. Specialization results in interdependence.

■ I said goodbye to the toy store owner and continued on my walk through town. I passed the elementary school as I rounded the corner. Public schools are services provided by the government and paid for by taxes.

Johnson Elementary School

What are taxes?■ Taxes are the money that the

government collects from individuals and businesses to pay for public goods and services.

■ Andy and Sara both paid a 4.5% sales tax when they bought their toys. Andy paid an extra $2.25 in tax, for a total of $52.25. Sara spent $2.93 in sales tax for a total of $67.93.

■ People also pay an income tax. An income tax is a percentage of money taken out of your income.

I passed the school and saw my friend Cole walking down the street. “How are you today?”, I asked Cole.■ “I am fantastic! I

just thought of a new idea: a bowling ball that expands as you throw it so that it is guaranteed to knock down every pin! I am going to be famous!”

What is an entrepreneur?

■ Cole is an entrepreneur. An entrepreneur is a person who comes up with a product or service, or a better way to produce one. He found the resources, the money, and the time to produce a new product.

■ I wished Cole good luck and continued on my way. On the next two blocks were two popcorn stands. They both lowered their prices!

What is free enterprise?■ Both popcorn stands

lowered their prices because of free enterprise. Free enterprise means competition. Companies compete with one another to get the most customers, and therefore, make the most money. I decided to buy popcorn from the first popcorn stand, because their price was the lowest.

Popcorn

$0.50---Now $0.25!

Popcorn $0.50---Now $0.30!

• Physical Trade Barriers

• are barriers to trade that are geographical in nature. They include such physical features as Mountains, Deserts, or if a country is Land-locked.

Trade Barriers

• Political Trade Barriers are barriers to trade that government put in place that block or inhibit international trade between countries.

Trade Barriers

The most common trade restrictions are:

•1) Tariffs- Which are taxes on imports.

• 2) Quotas- Which are limits on the quantity that can be imported.

•3) Embargos- The refusal to allow any type of trade with an entire country

•4) Sanctions- The limiting of trade between countries or companies.

The most common trade restrictions are:

•Most barriers to trade are designed to prevent imports from entering a country, and thus are used to protect domestic producers from competition and domestic workers from competition for their jobs.

•For this reason, a policy of high barriers to trade is referred to as protectionism.

•However, economists point out that protectionism benefits domestic firms by allowing them to charge higher prices to consumers; in effect, protectionism is an implicit subsidy to the protected firms, paid for by consumers.

•Although trade barriers may save the jobs of some domestic workers, it destroys jobs in other, probably more efficient, industries.

■ There are four different types of Economic Systems that governments can choose to answer the three basic economic questions.

Economic

Systems

A Country’s A Country’s Economic System must answer…Economic System must answer…

■ 3 BASIC economic questions:

1. What/how much to produce,

2. How to produce,

3. For whom to produce**How they answer these 3 questions will

determine how economically successful the country is.

What is a Traditional Economy?■ When the people do the

same type of work that their ancestors have done and produce the same goods this is known as a Traditional Economy.

■ The land is past from generation to generation.

■ They are generally substance farmers that produce just enough food for their families to eat.

Traditional Economy• Tradition means you do the same thing over and over

again…

•People produce only what they need to survive and very little, if anything extra.

•People inherit their jobs from their parents –Example: if your father is a farmer, you will be a Farmer. (there is little flexibility)

• This is the least developed (poorest) economic type

• There is never any change to modernize anything

What is a Command Economy?■ When the government

make all economic decisions for a country this is called a Command Economy.

■ The government owns all of the manufacturing factories, the farm land, even the stores.

■ This means there is no competition. The government decides what to make, how much to charge, and even who can buy the product.

Command (Socialist/Communist ) Economy

• Government owns what is being produced• Business & property belongs to the government instead of private

ownership.

• The government decides what will be produced

• The goal is to have economic equality (so there is no rich or no poor, everyone is the same)

• A shortage of good usually exists because the government makes all choices

• Better jobs & products do not receive more money= Unfair.

What is a Market Economy?■ When the producers and

consumers make all economic decisions for a country, this is called a Market Economy.

■ Private individuals or entrepreneurs own all of the manufacturing factories, the farm land, even the stores.

■ This means there is constantly competition to produce the best product and sell it at the best price.

■ Supply and Demand control the prices and production of goods.

Market (Capitalist) Economy■ Private ownership of business & property

• Little government regulation (the government doesn’t determine what to make)• Freedom to make own choices• Based on supply & demand

• Constantly changes to make better products

• More $ is offered for better products and workers

Mixed Economy

***Most Economic System are MIXED (a little of all 3 economic systems mixed together).***

■ This completes my lesson on economics! I hope you enjoyed the tour. Economics is an important part of our lives. Think of all of the ways you use economics everyday!

Goodbye

References■ Text Information:■ Think Quest Junior: “Econopolis” [Online] Available

http://tqjunior.advanced.org/3901/ Copyright 1997. Advanced Network and Services, Inc.

■ Pocket Dictionary for Economics. Available through Virginia Commonwealth Center for Economic Education (no copyright).

■ The Economic Songbook: Old Tunes with an Economic Twist. “We Are Consumers!” Copyright 1997, Martha C. Hopkins. James Madison University Center for Economic Education.

■ Graphics Information:

■ Microsoft Clip Gallery 3.0 (no sitations)■ #1 Free Clip Art. [Online Graphics]. Available

www.1cli[part.com/ Copyright 1999 #1Free Clip Art