Understanding Economics by Looking at our Colonial Heritage

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Understanding Economics by Looking at our
Colonial Heritage

• A Study Guide
• 5th Grade
• Unit 2

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Lets 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!

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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 cant
have everything we want.
But why CANT we have it all?
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We cant have it all because

• Resources are limited.
• Economists call this
• SCARCITY
• Scarcity means that there arent enough resources
  to give everyone everything they want.

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Factors of Production

• Economists usually call resources the Factors of
  Production.
• Lets review the types of resourcesOOPSfactors
  of production. (We might as well talk like
  economists since were studying economics!)

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There are 4 Factors of Production

• Natural resources
• Human Resource
• Capital Resource
• Entrepreneurship
• Lets look at what they are!

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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?
• Lets try this

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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?
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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?

Lets try this
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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?
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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?

Lets try this
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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?
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Entrepreneurship

• This long word really stands for a simple idea
  you probably already know. Lets 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!
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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!

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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?
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INVESTORS

• Sometimes people dont 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!

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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!

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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?

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Economists also have special names for the people
who make certain choices

• Here are some examples
• Producers
• Consumers
• Investors
• Importers
• Exporters
• Distributors

Lets see who these people are!
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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.
• TriStar 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?
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Producers in Colonial America

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

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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 Howies buys pepperoni, it is a
  consumer.

Can you think of other consumers?
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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.

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Think about this

• Can you be both a producer AND a consumer?
• Can a business be both a producer AND a consumer?

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YES!
Lets look at some examples from the colonies
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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 youve got it!
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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.
• Lets see what these people and companies do!

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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?
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The Colonists as Importers

• Colonists imported tea.
• Colonists imported many manufactured goods.

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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?
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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.

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• Were the colonists importers or exporters?

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BOTH!
DO YOU REMEMBER WHY?
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• The colonists exported natural resources.
• The colonists imported manufactured goods.

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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.

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Your Turn

• Give an example of each of the following
• Natural resource
• Human resource
• Capital resource
• Entrepreneur

Theres more
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Give an example of each of the following

• Producer
• Consumer
• Investor
• Shareholder
• Importer
• Exporter
• Distributor

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CONGRATULATIONS!

• You can now talk like an economist!
• Lets 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

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Words for Your Story

• Economics
• Factors of production
• Natural resources
• Human resources
• Capital resources
• Entrepreneurship
• Producer
• Consumer
• Investor
• Shareholder
• Importer
• Exporter
• Distributor

HAVE FUN!