Economic Understandings SS4E1 Use the basic concepts of trade, opportunity cost, specialization, voluntary exchange, productivity, and price incentives to illustrate historical events.

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

Barter-Trade When the 13 colonies were founded, some people were good hunters, some were craftsmen, and some were farmers. In order to get things that a person needed to survive, one person might have traded one item for another item. This is known as voluntary exchange. I have 5 rabbits to trade. Want to trade with me?

What is voluntary exchange? Yes. I will trade my milk and eggs for your rabbits. People will trade if they both get something from it. The lady trades a jug of milk and 3 eggs for 5 rabbits. She needs the rabbits to make rabbit stew. She’ll use the rabbits’ skin to make a fur cap. The man’s family needs milk and eggs.

Let’s review voluntary exchange. Voluntary exchange helps both buyers and sellers. Voluntary exchange was used in the system of colonial trade. (barter) The colonists swapped goods that they had for things they needed. Both parties must benefit from the trade. I’ll make your farming tools for 4 crates of apples. I’ll give you 4 crates of apples for farming tools.

Trade was very important after the Revolutionary War ended. Under the Articles of Confederation, Congress had no power to make laws about trade. This turned out to be a big problem among the thirteen states.

How was this a problem? Each state wanted to control their own trade. They tried to make big profits. Each state made their own money. Sometimes they would not accept another state’s money. Most foreign countries would not trade with the United States because the 13 states could not get along with each other.

How did they solve these economic problems? Thanks goodness they wrote the U.S. Constitution! The Constitution says that the federal government controls trade between the states and with foreign countries. The state government controls trade within its own state.

1. Who is the United States’ Number 1 trading partner? Canada 1. Who is the United States’ Number 1 trading partner? 2. Can you name one of the most important industries trading between Canada and the U.S.A.? (It’s big in Japan and Korea, too. Your family probably uses this every day!) Automobiles

Basic Economics Choices Specialization Price Incentives Productivity Voluntary Exchange Opportunity Cost Basic Economics Specialization Choices Price Incentives

$ $ $ $ $ $ Choices Cost You! We have to make economic choices every day. Some choices are easy because they’re not very expensive. Some choices are hard because they cost a lot of money. $ $ $ $

Examples of Daily Choices (Cost a small amount of money) Choice 1 Eat school lunch or Bring your lunch from home Choice 2 Go to the movies or Rent a movie and watch it at home Choice 3 Ride the bus to school or Ride with your parents

Examples of Hard Choices (Involves a lot of money) Choice 1 Buy a new car or Buy a used car Choice 2 Go on a trip or Save the money for college Choice 3 Go to work or Stay home and take care of the children

Opportunity Cost Opportunity cost is the value of what is given up when a choice is made. Every time you make a choice, you give up something else. You might decide to watch TV instead of washing a neighbor’s car to make some money. Your opportunity cost is the money you could have made washing the car!

Making Choices All choices require giving up something A farmer decides to grow corn instead of tomatoes. His opportunity cost is the tomatoes he could have grown.

Making Choices All choices require giving up something A girl decides to babysit instead of going roller skating with her friends. Her opportunity cost is the time she could have had with her friends roller skating.

Making Choices All choices require giving up something A dad decides to watch his son’s soccer game instead of earning some extra money fixing the neighbor’s computer. His opportunity cost is the money he could have earned fixing the computer.

And I’ll think about what I could use. I’ll have to decide, Let’s sing a song about choice and opportunity cost. Oh Give Me a Choice (Tune: Home on the Range) Oh give me a choice, Oh, a difficult choice, And I’ll think about what I could use. I’ll have to decide, With my eyes open wide, What I’ll give up and what I will choose. Opportunity cost! It’s the thing you give up when you choose. It’s the price that is paid When a choice must be made. It’s the thing that I surely will lose.

Leaders throughout history have had to make choices that involved opportunity cost. Their opportunity cost was the money that could have be used for important things at home or to trade with other countries closer to home. The kings and queens decided to spend money to search for a short cut to Asia. They paid for ships, supplies, and manpower.

How do price incentives affect people’s behavior and choices? 50% off A price incentive is used to affect people’s buying behavior. Incentives can motivate people to take action! An offer for “Buy one pizza, get one free,” is a price incentive. A sale where items are ½ price is a price incentive. SALE TODAY

Colonial Choices The behavior and choices of people in colonial times were affected by price incentives, too! What would make them the most money? That extra money was an incentive for colonists to grow, make, or build more!

Specialization in the New England Colonial Region People in New England specialized in: fishing lumber shipbuilding New England had harbors that made it a shipping trade center.

Specialization in the Mid-Atlantic Colonial Region The Mid-Atlantic colonies had rich farmland. Farmers produced large harvests of: wheat rye corn They also raised livestock. They worked with iron (blacksmith)

Specialization in the Southern Colonial Region Agriculture was king in the South. There were small farms and big plantations. It was profitable to grow: tobacco indigo rice cotton Slave labor was used to plant and harvest crops.

Productivity during the late 18th and early 19th centuries Technology Rocks! Talented Americans developed new inventions that changed our lives! There were many technological advancements! A few important examples include:

Spinning machines & Sewing machines Spinning machines made cloth very quickly. Sewing machines could make clothes quickly.

Cotton Gin Eli Whitney’s cotton gin was a simple machine that separated seeds from the cotton fibers. It increased the production of cotton tremendously. Cotton became the most important crop in the South. More slaves were needed to work in the cotton fields. .

Telegraph Samuel Morse’s telegraph was the first method of long-distance communication. Americans and businesses could finally communicate over long distances!

Steamboat Robert Fulton’s steamboat allowed people and goods to travel much faster along the nation’s rivers and canals.

Steam Locomotives Steam locomotives helped Americans move goods and people across the country.

Canals Canals paved new paths for steamboats. People and goods traveled faster from lakes, rivers and the ocean through canals.

Railroads Railroads made new paths for trains. Goods and people could travel from place to place much faster.

Productivity increased with these new inventions: Manufacturing - Factories Manufacturing is the process of making goods using machinery.

Assembly Lines Assembly Line The assembly line is where products are put together as they pass down a line of equipment and workers.

Mass Production Mass Production Mass production is making goods in large amounts by machinery and special methods.

This completes my lesson on economics! Economics is an important part of our lives. You use economics in many ways everyday.

References Text Information: Graphics Information: 4th Grade Student Workbook: “Section 4, Economic Understanding,” Available www.georgiaexperience.com, Copyright 2005, Carole Marsh/Gallopade International. Advanced Network and Services, Inc. The Economic Songbook: Old Tunes with an Economic Twist. “Oh Give Me a Choice!” 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