Objective: To examine the methods used to increase the economic boom in America.

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Presentation transcript:

Objective: To examine the methods used to increase the economic boom in America.

· In the 1920’s, people began to purchase items they couldn’t afford through the use of installment buying, or buying on credit.installment buying New Goods for Sale · Installment buying increased the demand for goods, while consumer debt increased.

· In the 1920’s business used advertising to convince consumers that they would be happier if they bought their product. Advertising

How does the stock market work? You buy 100 shares of stock of x $5.00 per share How much money have you invested? $ Scenario #1 stock increases to $20 per share 100 shares of stock x $20.00 per share How much are your 100 shares of stock now worth? $2, How much profit have you made? $2, stock value - $ initial investment $1, net profit

How does the stock market work? You buy 100 shares of stock of x $5.00 per share How much money have you invested? $ Scenario #2 stock decreases to $1 per share 100 shares of stock x $1 per share How much are your 100 shares of stock now worth? $ How much money have you lost? $ stock value - $ initial investment $ net loss

· Millions of Americans invested in the bull market, becoming rich as stock prices rose. bull market Those that didn’t have enough money to make a large investment bought stock on margin. Buying stock on margin = borrowing money from a stock broker and paying it back when you “cash out” Stocks Surge

Buying Stocks on Margin: Scenario A investor stock broker Hello, sir. I would like to purchase 100 shares of stock in the Ford Motor Company. How much is it going to cost me?

Buying Stocks on Margin: Scenario A investor stock broker Well, Ford stock costs $10 per share. You want to buy 100 shares? Figure it out yourself, smartguy!

Buying Stocks on Margin: Scenario A investor stock broker Ummm… 100 shares x $10 per share = $1, Oh, well. I only have $100. I can’t afford 100 shares.

Buying Stocks on Margin: Scenario A investor stock broker No, problem! Just give me $100 and you can owe me the rest! (This is known as buying on margin)

Buying Stocks on Margin: Scenario A investor stock broker Like, how much would that be? Let me think… $1,000 worth of stock - $100 paid = $900 owed Alright, it’s a deal!!

Buying Stocks on Margin: Scenario A investor stock broker Six months later, Ford stock doubles to $20 per share. My 100 shares are now worth shares x $20 per share $2,000

Buying Stocks on Margin: Scenario A investor stock broker That’s great! Now pay me the $900 you owe me!

Buying Stocks on Margin: Scenario A investor stock broker No problemo! It was a pleasure doing business with you!

Buying Stocks on Margin: Scenario A investor Now let’s figure out how much money I made! $2,000 net worth - $900 owed $1,100 profit - $100 initial investment $1,000 net profit

Buying Stocks on Margin: Scenario B investor stock broker Six months later, Ford stock decreases to $1 per share. My 100 shares are now worth shares x $1 per share $100

Buying Stocks on Margin: Scenario B investor stock broker Too bad, hotshot! You still owe me $900!

Buying Stocks on Margin: Scenario B investor stock broker But I’m broke! What am I going to do!

Buying Stocks on Margin: Scenario B investor stock broker I don’t care what you do as long as you pay me back!

* Unquestioned faith in the bull market helped lead to the Great Depression!Great Depression · Some people began to buy stocks on margin, which is similar to installment buying.

END

Do Now: What happens to the price of items as the demand increases? What happens to the price if the demand decreases? Demand = Price Demand = Price

The Law of Supply and Demand Honus Wagner baseball card (1909 ) Demand Only 50 – 60 Honus Wagner baseball cards exist in the world. + + Supply = = Price The card is valuable because of its scarcity. In 2007, a mint copy was sold for $2.35 million. sold

The Law of Supply and Demand One Direction stickers Demand Available almost everywhere. + + Supply = = Price Even though there is a large demand, there is a lack of scarcity. Sells for $1.50.

The Law of Supply and Demand A small pile of dirt. Demand Available almost everywhere. + + Supply = = Price No scarcity and no demand. Therefore, this pile of dirt is virtually worthless.

The Law of Supply and Demand GI Joe Action Figure (1964 ) Demand In “good” condition. + + Supply = = Price A 1964 GI Joe in good condition is relatively scarce. This one is for sale on Ebay for $350.00

The Law of Supply and Demand British poster during WWI asking people to preserve food. Demand U.S. farmers sold farm products to the European powers in large numbers. + + Supply = = Price Due to an increase in scarcity, the price of U.S. farm goods increased.

The Other Half: Farmers Europeans needed food. They bought U.S. farm products. U.S. farm prices increased. U.S. farmers borrowed money to buy more land and tractors. During World War I:

The Other Half: Farmers Europeans began to produce their own food again. The demand for U.S. farm products decreased. U.S. farm prices decreased. Farmers could not repay their debts. After World War I: