1. Chapter 3 Making a Living in Louisiana

2. I. Economics in Louisiana
Economics is the study of the production, distribution, and consumption of goods and services.
GLEs: 48, 49, 54

3. The Four Questions of Economics:
What is being produced or offered?
How will it be produced or offered?
How much should be produced or offered?
Who will buy the product or service?

4. Market System
The United States and most of the western world operate this way.
Also called the free enterprise or capitalist system
People own property, operate businesses, and make key decisions about the four questions of economics.
Government regulates business to ensure fair practices and safety of workers and consumers.

5. B. Command System Communist governments use this system.
Government officials decide how to answer the four questions of economics.
Examples: Vietnam, Cuba, North Korea, & China

6. C. Traditional System Underdeveloped nations may follow this system.
The four questions are answered by custom or tradition.
Jobs handed down from father to son
Men and women have different kinds of jobs.

7. D. Regulatory Agencies
Agencies that regulate, or monitor, economic activity
Example: The Public Service Commission regulates utilities within the state.

8. Economic Flow

9. II. Supply and Demand
GLEs: 42, 43, 45, 46, 47, 52, 53, 55, 60, 61, 79

10. A. Competition
Many different businesses make similar products because consumers want more than one option.
Businesses must market, advertise, and try to sell their products.

11. B. A surplus is an amount or quantity greater than what is needed.

12. C. Scarcity is an insufficient supply or shortage.

13. D. Wages and Salaries
Employees working for wages are paid by the hour.
The U.S. Congress sets the minimum wage to protect workers from low wages.
Overtime is paid to workers for the time they work past 40 hours in one week.
Salary is a fixed amount of money paid to an employee per years regardless of the number of hours worked.
Salaries are not regulated by the government.

14. E. Job scarcity is a state in which more people want or need jobs than there are jobs available.

15. Nurses provide a service
Nurses provide a service. So do doctors, lab techs, radiologists, and admitting clerks.

16. F. More Training Equals Better Jobs and Better Pay
The more skills, knowledge, and training a person has, the more productive and valuable he or she will be as a worker.
Being highly qualified improves a person’s career opportunities and earning potential.

17. **Specialization (Read more about it on page 54)
Concentrating on one specific skill, line of work, or area of study

18. G. Unemployment
The national unemployment rate rose steadily from and dropped slightly in 2004.
Louisiana unemployment rate rose steadily from and also dropped slightly in 2004.
LA’s unemployment rate is higher than the nation’s.

19. Unemployment rate

20. H. Allocation and Efficiency
Allocation is making sure enough resources are available for the demand.
Resources are used as efficiently as possible.
Efficiency is performing effectively with the least waste of time, effort, or resources.

21. What service does a sugar mill provide? What goods does it produce?

22. III. Money, Money, Money
GLEs: 44, 50, 58, 64, 80

23. A. Bartering
Involves the trading of goods and services without the exchange of money.
It is not as common as it once was because paying for goods and services with money is more convenient.

24. B. Silver and Gold
Carrying items to trade was inconvenient; money was more convenient.
People valued gold and silver because they are beautiful and are also scarce, which means they hold value.
Money itself has no value, the goods and services we want have value.
What would a dollar bill get you in a rainforest? Would it have the same value as in the U.S. ?

25. C. Checks and Debit
Customers deposit their wages into checking accounts.
Checks and debit cards are two ways customers can purchase goods and services without using cash.
The business where the customer made a purchase communicates with the bank.
The bank then subtracts the correct amount of money from the customer’s checking account to cover the transaction and deposits it into the business’s account.

26. ATM (Automated Teller Machine)

27. D. Credit Cards A credit card is like a line of credit.
The amount of credit the company issuing the card is willing to offer a person is based on his or her income and credit history.
The holder of a credit card can make purchases up to his or her credit limit.
Each month, the company sends a statement, which lists all the purchases made.
The customer then pays either the total amount charged or a portion of it
Interest is charged on any unpaid balances.

28. E. Interest The money a consumer earns on money deposited
The money a consumer pays to a lending agency on money borrowed

29. F. Interest Rates
Interest charged is usually a percent of the amount deposited or owed.

30. G. Simple and Compound Interest
If a balance is not paid in full, interest is added monthly to the outstanding balance. This is compound interest, which adds up quickly.
Consumers must monitor their debt carefully because increasing debt and interest payments can lead to financial problems.

31. IV. Personal Finance
GLEs:43, 59, 60, 61

32. A. Saving
A certain percentage of our income should be set aside in a savings account.
It will help to pay unexpected expenses or to save up for expensive items.

33. Have you ever put money in a piggy bank
Have you ever put money in a piggy bank? If you have, you had a savings account.

34. B. Investing
Putting money into long-term savings plans, such as savings bonds or shares of business stocks.

35. C. Inflation and Deflation
Inflation occurs when the demand for goods and services is greater than the supply.
Ideally, pay increases keep up with inflation.
Deflation occurs when there is a greater supply of goods and services than demand for them.
During deflation, wages and salaries may fall more than prices.

36. **The Consumer Price Index (CPI) –(Read more about it on page 61)
Shows how much change there has been in the price of certain goods.

37. Consumer Price Index

38. V. Business at Home and Abroad
GLEs:13, 38, 55, 57, 58, 59, 79

39. A. Proprietorship
A business owned by one person

40. B. Partnership
A business owned by two or more people who share the profits and losses

41. C. Corporation
A business owned by shareholders who have purchased stock, or shares of the business
Investors earn profits, or dividends, when the business is successful but suffer losses when it is not.
A board of directors is elected by stockholders to oversee the operation of the corporation.

42. D. Stocks and the Stock Market
Investors invest their money in corporations by buying shares, or portions, of the companies called stocks.
Most stocks are bought and sold on the New York Stock Exchange.
If a corporation is valued at $1 million, it might divide its stock into 100,000 shares costing $10 each.

43. E. Foreign Trade and Global Market
The global market is all of the business and trade occurring between the world’s nations.
Technologies such as the Internet, satellite communications, jet airplanes, and huge freighter ships make it easier for most nations to participate in the global market.
Foreign trade is necessary in the global market because it allows countries to import need goods and export excess goods.

44. F. Tariff and Trade Agreements
A tariff is a tax on foreign or imported goods.
A tariff is placed on Chinese crawfish to allow Louisiana crawfish producers to compete in the market.
NAFTA—North American Free Trade Agreement—between the United States, Canada, and Mexico was created to gradually remove tariffs on one another’s countries.

45. **The Gross Domestic Product (GDP)—Read more about it on page 63
An economic indicator showing how well the economy is doing.
If the GDP is increasing, the economy is doing well.
An increasing GDP also means good wages, steady employment, and financial security for the average person.

46. Gross Domestic Product

47. VI. Louisiana’s Economy
The Mississippi River, the Gulf of Mexico, and other waterways make the state an important center for trade
The state has a wealth of natural resources and minerals, including salt, oil, natural gas, sulphur, gypsum, and clay
The state has fertile land, which makes agriculture, forestry, and the raising of livestock key industries
The land, water, and climate are conducive to fishing, aquaculture, and even filmmaking
GLEs:13, 45, 48, 51, 52, 53, 56, 57, 58, 64, 79, 80

48. A. A World Producer
Louisiana has been a world leader in cotton, sugarcane, and tobacco production.
As regions began growing the same crops, competition increased and price fell.
Farmers incomes declined.
When the demand for products declines, our economy suffers.

49. B. Oil and Natural Gas
Vital to Louisiana’s economy, our most important industries.
Louisiana is the second leading producer of natural gas.
The third leading producer of oil.
Exxon refinery at Baton Rouge has the largest capacity of any refinery in the United States.
Hundreds of oil and gas wells in the Gulf of Mexico

50. **A Successful Strike! (Read more about it on page 65)
Oil well near Jennings

51. **Edmund McIlhenny (Read more about it on page 65)
Do you like Tabasco Sauce?
**Edmund McIlhenny (Read more about it on page 65)

52. **Global Positioning Satellites (Read more about it on page 66)

53. C. Fishing Louisiana’s second most important industry
One third of all the fish harvested in the United States come from Louisiana!

54. Red Swamp Crawfish

55. D. Aquaculture The practice of raising fish commercially
Crawfish, catfish, and alligator meat and hides are produced.

56. E. Agriculture and Livestock
Louisiana is:
The second largest producer of sweet potatoes and sugarcane.
The third largest producer of rice.
The fifth largest producer of cotton.
A major peach producer (Lincoln Parish).
A major strawberry producer (Tangipahoa Parish).
The only location for perique tobacco production (St. James Parish).

57. Hauling Sugarcane

58. F. Forestry
14 million acres of trees
Southern pine and cypress

59. **Hollywood in Louisiana (Read more about it on page 67)

60. G. Minerals
Sulphur, salt, gypsum (used for graveling roads), clay, and peat

61. Louisiana’s Natural Resources

62. **Drake’s Salt Works (Read more about it on page 68)

63. H. Manufacturing
Louisiana’s two largest manufacturers are AT&T and Avondale Industries.

64. I. Tourism and Conventions
Louisiana spends more money on historic preservation than any other state.
The state’s historic sites draw large numbers of tourists to the state each year, which has a positive impact on the state’s economy
Mardi Gras

65. Mardi Gras Parade

66. ** Joe Biedenharn (Read more about it on page 70)

67. J. Trade
Louisiana plays an important role in national and international trade because it is located on the Mississippi River and Gulf of Mexico.
Louisiana has 5 of the nation’s 12 busiest seaports:
Ports of South Louisiana
New Orleans
Baton Rouge
Plaquemines
Lake Charles
Gulf location attracts foreign business.

68. K. Taxes and User Fees
Both raise money so the government can pay for goods and services.
Income tax is assessed by both the state and federal governments and is based on how much money a person earns.
Property tax is assessed by the parish and is based on home and property value.
Sales tax and gasoline tax
User fees are things like admission fees to state parks and museums and fees to cross toll bridges or ride ferries.

69. L. Louisiana’s Economic Future
Hurricane Katrina and Rita destroyed New Orleans and many other ports, stopping economic activity.
Offshore oil industry was destroyed, so gas prices rose
Commercial fishermen lost their boats, docks, and warehouses.
Thousands of acres of timber were destroyed.
Louisiana’s transportation infrastructure was destroyed (bridges and highways).

70. Chapter Review
GLEs:13, 37