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

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.

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.