Understanding Economics by Looking at our Colonial Heritage

Understanding Economics by Looking at our Colonial Heritage A Study Guide 5 th Grade Unit 2

Let’s talk about what economics is all about… • Economics is simply the study of the choices people make. • We usually think of money when we think of economics, but economics is more than money. • Why? • Because we make choices every day!

Here are some examples of choices we make. • Should I sleep in or go to school? • Should I save my money or buy a new video game? • Should I read this book or that book? ALL people must make choices because we can’t have everything we want. But why CAN’T we have it all?

We can’t have it all because… • Resources are limited. • Economists call this SCARCITY • Scarcity means that there aren’t enough resources to give everyone everything they want.

Factors of Production • Economists usually call resources the Factors of Production. • Let’s review the types of resources…OOPS…factors of production. (We might as well talk like economists since we’re studying economics!)

There are 4 Factors of Production • • Natural resources Human Resource Capital Resource Entrepreneurship Let’s look at what they are!

NATURAL RESOURCES • Natural resources are all things found in nature that can be used to produce a good or create a service. • Can you think of some examples? Let’s try this…

The Colonists and Natural Resources • What natural resources might the colonists have needed? • Trees for wood to build shelter and furniture • Water to keep their crops healthy • Fish for food • Horses for transportation • Gold for trading Can you think of others?

HUMAN RESOURCE • Human resource is the work and thought that people provide to produce a good or create a service. – A Teacher is a human resource. – People who work on assembly lines are human resources. • Can you think of others? Let’s try this…

What human resources might you have found in the colonies? • • • People to plant and harvest crops Ministers at church services Blacksmiths Fishermen People to make cloth and sew clothing Can you think of others?

CAPITAL RESOURCES • Capital resources are the tools and machinery used to produce a good or provide a service. – Sewing machines are capital resources. – Assembly lines are capital resources. – Computers are capital resources. Can you think of others? Let’s try this…

What capital resources might the colonists have used? • Plows for farming • Fishing poles for fishing • Boats, ships, canoes and wagons for transporting goods. Can you think of others?

Entrepreneurship • This long word really stands for a simple idea you probably already know. Let’s see… • Entrepreneurs are people who bring the other three factors of production together to produce a good or create a service. • Entrepreneurs take a risk when they do this. Why do they take the risk? THEY HOPE TO MAKE A PROFIT!

Do YOU know an entrepreneur? • Do you know someone who owns a business? • Do you have a doctor who has his or her own office? • Have you ever heard of Walt Disney, Henry Ford or Oprah Winfrey? If you answered ‘YES’ to any of these questions, then you know or have heard of an entrepreneur!

Entrepreneurs in Colonial America • Store owners and the people who started trading posts were entrepreneurs. • People who owned and ran farms were entrepreneurs. • Plantation owners were entrepreneurs. • Fur trading companies were run by entrepreneurs. Can you think of others?

INVESTORS • Sometimes people don’t want to take the risks that entrepreneurs take, but they want to make a profit, too! • These people loan money to entrepreneurs so they can build their businesses. • We call these people investors. • Have you ever loaned money to someone for a profit? Did you ever collect interest? • If you have a savings account, you have loaned money to a bank and you are an INVESTOR!

SHAREHOLDERS • Shareholders are special types of investors. • Shareholders pay money to buy a small piece of a business. • These businesses are called corporations. Sometimes shareholders buy many pieces of a corporation. • The shares of the corporation they buy are called ‘stocks’. Do you know anyone who owns stocks? • If you do, you know a shareholder!

Economics is not new! As you have seen, during colonial times, the same factors of production were used. The colonists created businesses and made choices. What choices? How about these: • Do I use that tree for my house or should I build a canoe? • Do I use my land to plant corn or should I grow cotton? • Do I start a blacksmith shop or open up a general store?

Economists also have special names for the people who make certain choices… • Here are some examples: – – – Producers Consumers Investors Importers Exporters Distributors Let’s see who these people are!

PRODUCERS • Producers are the people and businesses who choose to produce goods. – Pizza Hut is a producer of pizza. – Artists are producers of paintings and sculptures. – Tri. Star Pictures is a producer of movies. – General Motors is a producer of automobiles and trucks. – If you make necklaces or bracelets, you produce jewelry. Can you think of other producers?

Producers in Colonial America • Mills produced grain. • Textile mills produced cloth. • Many fishing companies produced fuel from whale oil. • Carpenters produced furniture.

CONSUMERS • Consumers are the people and businesses who choose to use goods and services. – When you buy a new pair of jeans you are a consumer. – When Ford Motor Company buys steel for its cars, it is a consumer. – When Hungry Howie’s buys pepperoni, it is a consumer. Can you think of other consumers?

Consumers in Colonial America • When textile mills bought cotton to make cloth, they were consumers. • When carpenters bought lumber to make furniture, they were consumers. • When colonists ate the crops that were grown, they were consumers.

Think about this… • Can you be both a producer AND a consumer? • Can a business be both a producer AND a consumer?

YES! Let’s look at some examples from the colonies…

What am I? • I just bought a new plow in town. I am a _________. • I grew 100 acres of corn this year. I am a _________. • I used 10 yards of cloth to make curtains for the town hall. When I bought the cloth I was a _______. When I made the curtains I was a _________. • I bought lumber from the mill to build wagons. When I bought the lumber I was a ________. When I sold the wagons I was a __________. I think you’ve got it!

IMPORTERS, EXPORTERS AND DISTRIBUTORS • Once goods are produced, they have to get to the market where they will be sold. • Sometimes, the market is in another country. • Sometimes goods arrive at one place and have to be sent to another. • These are the times we talk about importers, exporters and distributors. • Let’s see what these people and companies do!

IMPORTERS • Importers buy goods that were produced in another country. – The United States imports most of its bananas from countries where it is warmer. So, for some products, the United States is an importer. – Countries in Europe import many American cars. When they do, Europe is an importer. What did the colonists import?

The Colonists as Importers • Colonists imported tea. • Colonists imported many manufactured goods.

EXPORTERS • When a country or company sells goods to markets in other countries, they are exporters. – The United States exports automobiles to many other countries. – Farmers in the Midwest export many tons of wheat to other countries. What did the colonists export?

The Colonists as Exporters • The colonists exported cotton to Europe. • Fur trading companies exported furs to Europe. • The colonies exported MANY natural resources to Europe.

Were the colonists importers or exporters?

BOTH! DO YOU REMEMBER WHY?

• The colonists exported natural resources. • The colonists imported manufactured goods.

So what are distributors? • Distributors are the people and businesses that buy goods and then send them to other places. – When the United States imports foreign cars, the distributors send them around the country so they can be sold. – When a farmer sells his wheat to a large company, the company is a distributor when it sends the wheat to other markets or companies.

Your Turn • Give an example of each of the following: – – Natural resource Human resource Capital resource Entrepreneur There’s more…

Give an example of each of the following: • Producer • Consumer • Investor • Shareholder • Importer • Exporter • Distributor

CONGRATULATIONS! You can now talk like an economist! Let’s give it a try. ~Write a story about colonial America that correctly uses all of the words we have studied. ~Your story should have a beginning, a middle, and an ending. Use details to show you really CAN talk like an economist! Here are the words…

Words for Your Story • • • • Economics Factors of production Natural resources Human resources Capital resources Entrepreneurship Producer Consumer Investor Shareholder Importer Exporter Distributor HAVE FUN!