1. Louisiana: The History of an American State
Chapter 3
Louisiana’s Economy: Resources and Rewards
Study Presentation
©2005 Clairmont Press

2. Chapter 3 Louisiana’s Economy: Resources and Rewards
Section 1: Basic Economic Concepts
Section 2: Louisiana’s Economic History
Section 3: Louisiana’s Resources
Section 4: Providing Louisiana’s Goods and Services

3. Section 1: Basic Economic Concepts
ESSENTIAL QUESTION:
How do people satisfy their wants and needs in our economic system?

4. Section 1: Basic Economic Concepts
What words do I need to know?
goods
services
consumer
producer
natural resources
human resources
capital resources
scarcity

5. Section 1: Basic Economic Concepts
9. opportunity cost
10. supply
11. demand
12. profit
13. traditional economy
14. command economy
15. market economy

6. Wants 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

7. Resources 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

8. 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

9. 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

10. Trade-Offs
Either/or choice: not always the best
May combine parts of choices as trade-off
Trade-off choices to get wants & needs

11. 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)

12. 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?

13. Making the necessary decisions
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

14. How to Produce Plan of action: Overall production schedules:
How to carry out plan
Process of implementation
Supplies needed
Overall production schedules:
When to start production
When to end production

15. Items to consider for plan
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

16. For Whom to Produce
Develop knowledge of consumers
Study needs of consumers
Consider supply & demand
Analyze & plan for competitors
Consider advertising

17. Economic Systems economist: one who studies the economy
Three basic kinds of economies
Traditional Economy
Command Economy
Market Economy
Economy may function as combination of all three

18. Traditional Economy
Customs, habits, & beliefs determine and answer the four basic economic questions
Continues in the way it has always been done

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

20. 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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21. Section 2: Louisiana’s Economic History
ESSENTIAL QUESTION:
What were Louisiana’s early economic systems?

22. Section 2: Louisiana’s Economic History
What words do I need to know?
barter
mercantilism
smuggling
indigo
tobacco
commerce

23. Louisiana’s Economic History
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

24. Louisiana’s Economic History
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”

25. Louisiana’s Economic History
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

26. Louisiana’s Economic History
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

27. Louisiana’s Economic History
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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28. Section 3: Louisiana’s Resources
ESSENTIAL QUESTION:
What roles do natural resources, capital resources, and human resources play in the economy of Louisiana?

29. Section 3: Louisiana’s Resources
What words do I need to know?
mineral resources
nonrenewable
lignite
biological resources
renewable
pulpwood
labor union

30. Natural 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

31. Natural 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

32. Mineral Resources
Oil
Natural Gas
Salt
Sulfur
Lignite

33. 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

34. 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

35. 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

36. 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

37. 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

38. Lignite
Soft, brownish-black coal
Burns poorly
Mined since 1970s
Found mostly in DeSoto Parish
Used for electric power station near Mansfield

39. Biological Resources Biological resources
Common term: plants & animals
Scientific term: flora & fauna
renewable: replenish over time
Main divisions:
Forests
Wildlife
Fish

40. Forests
50% of Louisiana in forests
2nd largest income producer
90% pine trees
75% trees cut for pulpwood
Large trees cut for sawtimber

41. 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

42. Wildlife Variety of wildlife Economic resources Hunting regulations
History of trapping & hunting tradition
Economic resources
Fur pelts:
Once sold more than a million pelts annually
Hunting regulations
State Department of Wildlife and Fisheries

43. Wildlife Hunting Timber cutting Source of food Recreation
Millions of dollars for state’s economy
Timber cutting
Reduced forest land
Forest animals decreased
Increase in recent years

44. Wildlife White-tailed dear Black bear Wild turkey
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

45. 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

46. Freshwater bream, bass, perch, catfish Game fish:
Fish (Recreation)
Freshwater bream, bass, perch, catfish
Game fish:
trout, redfish, drum, mackerel, blue marlin, amberjack, grouper, & tarpon (illegal to sell commercially)

47. Fish (Commercial)
Crawfish raised on crawfish farms
Catfish sold: freshwater & farms
Commercial fishing: tuna, sea trout, red snapper

48. Capital 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

49. 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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50. Section 4: Providing Louisiana’s Goods and Services
ESSENTIAL QUESTION:
What is Louisiana’s place in the global economy?

51. Section 4: Providing Louisiana’s Goods 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

52. Louisiana’s Goods and 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

53. Manufacturing 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

54. Manufacturing
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

55. Aerospace and Aviation
Louisiana workers part of the United States space program
Space shuttles assembled in New Orleans
Lake Charles aircraft assembly for military use

56. Biotechnology
Combines biological research with engineering
Pennington Biomedical Center leader in research

57. Service 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”

58. Economic 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

59. Louisiana in the U.S. and Global Economies
1st economic systems: simple barter economies
Today’s systems interdependent
overlap
producers & consumers rely on each other
Louisiana’s offshore port: Superport

60. 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

61. Gross domestic product Consumer price index Inflation
Measuring the Economy
Economic indicators
Gross domestic product
Consumer price index
Inflation
Unemployment rates
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62. Learning Objectives After completing this chapter, you’ll be able to:
Describe the functions and characteristics of money.
Explain the services that banks offer.
continued

63. Learning Objectives After completing this chapter, you’ll be able to:
Name the types of banks.
Identify the functions of the Federal Reserve System.

64. Why It’s Important
Understanding the way money and financial institutions work is crucial to understanding the economy.

65. Key Words continued monetary system money financial institution
bank account
deposit
withdrawal
interest
continued

66. Key Words electronic funds transfer (EFT) collateral mortgage
safety-deposit box
Federal Reserve System

67. The History of Money
In the monetary system goods and services are indirectly exchanged using money, which can then be exchanged for other goods and services.

68. The History of Money
Money can be anything that people accept as a standard for payment.

69. The History of Money
In other times and places people have used shells, stones, corn, parrot feathers, and even gopher tails for money.

70. WOULD THESE ITEMS BE ACCEPTABLE AS MONEY?
Figure
12.1
WOULD THESE ITEMS BE ACCEPTABLE AS MONEY?
Imagine what business would be like without money. If you worked in a fast-food restaurant, it might pay you in food. Bartering is exchanging one product for another. American Colonialists engaged in this way of doing business.
Explain why or why not these items could serve as money. Recreate this table and check the appropriate box(es) for each that applies.

71. Functions of Money The three basic functions of money are:
It is a medium of exchange
It is a standard of value
It is a store of value

72. Characteristics of Money
For money to carry out its functions, it must have several characteristics. Money must be:
Stable in value
Scarce
Accepted
continued

73. Banking
The banking system is the main type of financial institution, or organization for managing money, in our economy.

74. Storing Money
A bank account is a record of how much money a customer has put into or taken out of a bank.

75. Storing Money The money put in a bank is called a deposit.
The money taken out of a bank is called a withdrawal.

76. Storing Money
Checking accounts are used for storing money in the short term so you can draw on it easily if you want to go shopping or pay a bill.

77. Transferring Money
Banks make it easy to transfer money from one person or business to another.

78. Transferring Money
Today more banks are using electronic funds transfer (EFT) to move money around.
With EFT, money is transferred from one account to another through a network of computers.

79. Lending Money
The money you deposit in a bank makes it possible for the bank to lend money to other customers.

80. Lending Money Most bank loans require some form of collateral.
Collateral is something valuable you put up for a loan.

81. Lending Money The four main types of loans that banks offer are:
A mortgage loan
A commercial loan
An individual loan
A line of credit
continued

82. Lending Money
A mortgage is a deed to give the property to the lender if the loan is not paid back.

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