Economic Understandings

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

2.  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.

3. 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?

4. What is voluntary exchange?
 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.
Yes. I will trade
my milk and eggs
for your rabbits.

5. 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.
I’ll make your
farming tools
for 4 crates of
apples.
I’ll give you 4
crates of apples
for farming
tools.
Both parties
must benefit
from the trade.

6. 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.

7. 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.

8. 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.

9. 1. Who is the United
States’ Number 1
trading partner?
 Canada
 Automobiles
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!)

10. Basic Economics

11. 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.

12. 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 Daily Choices
(Cost a small amount of money)

13. 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
Examples of Hard Choices
(Involves a lot of money)

14. 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!

15. 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.

16. 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.

17. 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.

18. 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.
Let’s sing a song about
choice and opportunity
cost.

19. Leaders throughout history have had to
make choices that involved opportunity cost.
 The kings and
queens decided to
spend money to
search for a short cut
to Asia. They paid for
ships, supplies, and
manpower.
 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.

20. How do price incentives affect
people’s behavior and choices?
 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
50% off

21. 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!

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

23. 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)

24. 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.

25. 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:

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

27. 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.
.

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

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

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

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

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

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

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

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

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

37. References
 Text 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